Chinalco May Accept Lower Stake in Rio Tinto, Herald Says

Aluminum Corp. of China, the nation¡¯s biggest aluminum producer, may accept a lower stake in Rio Tinto Group to win approval for its $19.5 billion investment, the Sydney Morning Herald said, citing people close to the company.

Chinalco, as the state-owned entity is known, is open to letting Rio sell convertible bonds to other shareholders, the newspaper said. It would be prepared to accept a stake of 15 percent, the Herald said. That would potentially avoid a breach of foreign ownership limits.

Chinalco, already Rio¡¯s largest holder with 9 percent, plans to buy $7.2 billion of convertible debt and $12.3 billion worth of stakes in London-based Rio¡¯s projects. The changes don¡¯t remove concerns that an arm of China¡¯s communist party will still be getting too much control of Rio, which has a third of its assets in Australia, said opposition Senator Barnaby Joyce, who is leading a campaign against the deal.

¡°We have the problem that what is the structure of the deal,¡± Joyce told Bloomberg Television. ¡°We still have the same problem that the resource in situ in the ground is owned by another nation¡¯s government inside our nation. That is the problem.¡±

Rio rose 2.3 percent in Sydney trading to A$66.30 at 10:07 a.m. after rising 4.3 percent in London yesterday. Under the existing proposal, Chinalco will have an 18 percent interest in Rio Tinto

¡°We don¡¯t comment on market rumor and speculation,¡± said Amanda Buckley, spokeswoman for London-based Rio. Liz Morley, a London-based spokeswoman for Chinalco, declined to comment when contacted by telephone.

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