Rio Tinto to hold off revising Chinalco tie-up

 senior Rio Tinto executive said on Tuesday that ¡°any revision¡± to the miner¡¯s planned $19.5bn tie-up with Chinalco, the Chinese aluminium group, would be decided after the completion of shareholder meetings over the next week.

The comments from Sam Walsh, the Anglo-Australian miner¡¯s head of iron ore who was speaking on the sidelines of a mining conference in Canberra, came as Jan du Plessis, Rio¡¯s new chairman flew to Australia to meet investors and government officials.

¡°Once we have heard all the views, we will determine a course of action in relation to the Chinalco strategic alliance,¡± Mr Walsh said.

He added that economic conditions had improved since the deal was struck with the Chinese aluminium group in February and reiterated the miner must take into account the wishes of shareholders.

Investors from the UK and Australia have for months publicly attacked the deal ¨C particularly their exclusion from a dilutive $7.2bn convertible bond Rio has agreed to sell Chinalco that would double the Chinese group¡¯s stake to 18 per cent.

Chinalco is prepared to offer material concessions to its investment in Rio in an attempt to help win over hostile shareholders and make it easier for the Australian government to clear the deal.

Canberra is expected to rule on the investment in mid June, although that timing could slip if a revised proposal is submitted.

People close to the deal said Chinalco could recast the deal to limit its stake in Rio to 15 per cent, a concession that may appease Rio shareholders by making available the 3 per cent of Rio equity Chinalco is prepared to sacrifice.

However, Chinalco would not go below 15 per cent and would not sacrifice the $12.3bn worth of minority stakes it has agreed to buy in Rio¡¯s assets, including a 15 per cent stake in Pilbara iron ore assets in Western Australia. Its demand for two Rio board seats is also understood to be non-negotiable..

Rio refused to provide details of Mr du Plessis¡¯s Australian meetings. However, the chairman¡¯s meetings with government officials would be expected to take place in Canberra.

Mr Walsh on Tuesday hit out at critics opposed to Chinalco¡¯s proposed investment, including opposition to a Chinese group taking minority stakes in Rio¡¯s mining ventures.

He said Rio already had dozens of joint ventures and many of those were with customers.

¡±I think we need to get a grip and look at the history of our industry,¡± Mr Walsh said. ¡°It beggars belief that any one can now object to this in 2009...after nearly 50 years of experience both here and internationally.¡±

He added it was possible for Rio to have close relationships with customers and maintain commercial independence at the same time and that Chinalco would not take part in iron ore price talks with customers. Rio on Tuesday agreed a 33 per cent cut in contract iron ore prices with Japan¡¯s Nippon Steel for the current shipping year.

¡°There is no intention for [Chinalco] ¡­ to be involved in pricing,¡± he said. ¡±We set iron price at a product group level, not an asset level and certainly not at a board level.¡±

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