UPDATE: Chinalco: No Request To Renegotiate Rio Deal
February 27 2009 - 7:30AM
Dow Jones News
Aluminum Corp. of China, or Chinalco, is aware of differing
opinions among Rio Tinto PLC (RTP) shareholders about its
investment in the Anglo-Australian miner, but Chinalco President
Xiong Weiping said the company hasn't received any request to
renegotiate the deal.
"I believe Rio's management has capability and enough reason to
explain (the deal) to shareholders," Xiong said Friday.
Xiong replaced Xiao Yaqing as Chinalco's president on Feb. 18.
Xiao signed a US$19.5 billion investment deal with Rio Tinto PLC
(RTP) - China's biggest foreign investment - before he left the
state-owned company to become the deputy secretary-general of the
State Council, China's Cabinet.
The deal gives Chinalco minority stakes in a range of assets and
convertible bonds that could ultimately give it an 18% stake in the
miner.
The investment in Rio by China's biggest aluminum producer by
output has raised concerns from Rio's shareholders and Australia's
politicians, who deem the deal to be a threat to shareholders' and
Australia's interests.
After Rio and Chinalco disclosed details of the deal, some Rio
shareholders said there could be a conflict of interest, because
the state-owned company would gain seats on Rio's board and could
represent the interests of China's government - a major consumer of
the raw materials Rio produces.
However, Xiong said: "I didn't notice that Rio's shareholders
are opposing Chinese companies, they are mostly dissatisfied with
the management team."
He reiterated that Chinalco's investment in Rio is purely
"commercial."
"Chinalco is only Rio's shareholder, and we will leave Rio's
management team to run the business," Xiong said, adding that Rio
will act in the interest of its shareholders in iron-ore price
talks.
Xiong said financing of the investment will put pressure on his
company's operations, but Chinalco remains confident of Rio's
business prospects.
"The investment will bring Chinalco real profit over the
long-term," Xiong said.
He declined to give details about how the company will fund the
deal, but said the state-owned company will reach financing
agreements with a group of domestic policy and commercial lenders
by March 30.
Xiao Yaqing, the former president of Chinalco, earlier said two
policy banks - China Development Bank and the Export-Import Bank of
China - will lead a group of local financial institutions to
support the deal. The combination of local lenders, mostly
state-owned, has raised concerns that the Chinese government is
behind the deal.
Chinalco submitted a proposal for the deal to Australia's
Foreign Investment Review Board immediately after it announced the
details of the deal Feb. 19, Xiong said.
The deal will need approval from Australian Competition and
Consumer Commission and the Foreign Investment Review Board.
Earlier, Australian Treasurer Wayne Swan said the government
will examine the deal particularly closely and the decision on
whether to approve the transaction is a "tough" one.
-By Shai Oster and Juan Chen; Dow Jones Newswires; 8610 6588
5848; juan.chen@dowjones.com