China may underwrite new Rio raising

Rio is understood to have told state-owned Chinalco that talks with shareholders mean changes must be made to the $US19.5 billion of asset and bond sales.

Chinalco, for its part, has not indicated to Rio that it is happy to compromise on the deal, which could mean that talks have extended to beyond just the terms of the bonds, which the Chinese company is thought to be resigned to changing.

Chinalco has said it would not be happy to change the asset sales in the deal.

The rumours of a capital raising underwritten by Chinalco are the latest to do the rounds as new Rio chairman Jan du Plessis faces shareholders who are angry over the deal done by his predecessor, Paul Skinner.

Neither Rio nor Chinalco would comment on the speculation last night.

Rio's share price surged $2.62 to $63.77 in local trade yesterday.

The miner is facing a shareholder revolt on the Chinalco deal, even if Wayne Swan approves it in its current state.

The deal was inked in February amid frozen debt and equity markets to bolster Rio's balance sheet, which is laden with $US39 billion of debt from the ill-fated 2007 acquisition of Alcan.

Shareholders, particularly in London, have been angry that they were not given the opportunity to participate in a capital raising alongside Chinalco, which is Rio's biggest shareholder and will receive an attractive coupon of 9 per cent on the bonds.

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