Chinalco might underwrite possible Rio raising, report

Global miner Rio Tinto might replace a $US7.2 billion convertible bond sale to Chinalco with a capital raising underwritten by the Chinese aluminium giant, according to a newspaper report.

The Australian newspaper says Rio Tinto is talking with institutional shareholders about the possibility of a capital raising. Institutional shareholders in the UK and Australia have criticised the $US19.5 billion deal between Rio and Chinalco, saying the nine per cent yield on convertible bonds was too generous.

The paper says it's believed Rio has told Chinalco that shareholder feedback has necessitated changes to the deal, which was signed in February.

Under the agreement, the Chinese-owned company would pay $US12.3 billion for stakes in Rio's iron ore, copper and aluminium assets, and $US7.2 billion for convertible bonds that would double its equity interest to 18 per cent.

The Australian says while Chinalco is resigned to changing the terms of the bonds, the asset sales component of the deal might prove harder to negotiate.

Separately, The Australian Financial Review reports that Rio Tinto, BHP Billiton and Brazilian resources giant Vale are believed to be negotiating with Japan's Nippon Steel and South Korea's POSCO on iron ore prices in Seoul this week.

Should China not fall into line with a deal struck between the major miners and the Japanese and South Korean steel makers, the benchmark system would effectively be split for the first time in its 40-year history, the paper says.

By 1215 AEST, Rio Tinto shares had edged up 0.21 per cent to $63.91, against around a half per cent fall in the benchmark index.

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