UPDATE: Rio Tinto Cautions On Commodities; Launches Share Issue
June 16 2009 - 6:38AM
Dow Jones News
Anglo-Australian miner Rio Tinto PLC (RTP) Tuesday said the
outlook for key commodities remains uncertain and it expects global
economic activity to remain weak, possibly through 2010.
"As a result of difficult market and general economic
conditions...there has also been reduced direct and indirect demand
for the group's products and these declines have had, and are
expected to continue to have, a material adverse impact on the
group's revenues, earnings, cash flows, asset values and growth,"
Rio Tinto said in the prospectus for its rights issue.
Rio is issuing 21 new shares for every 40 existing shares to
raise $15.2 billion. Existing shareholders can take up new shares
Tuesday, and they are expected to commence trading Wednesday.
New shares are priced at 1,400 pence in the U.K. and A$28.29 in
Australia.
Rio Tinto launched the $15.2 billion rights issue to pay down
debt it took on when it acquired Canada's Alcan in 2007. Rio Tinto
had net debt of $37.9 billion as of March 31; that is expected to
fall to $23.2 billion after the rights issue is complete.
The miner announced the rights issue June 5 as it dropped a
proposed $19.5 billion investment from Aluminum Corp. of China, or
Chinalco. The same day it also announced an iron ore joint venture
with rival BHP Billiton Ltd. (BHP).
Changing market conditions allowed the miner to spurn Chinalco,
but Tuesday it cautioned that the outlook for commodities remains
unclear.
"While iron ore prices for the 2009/10 contract year have been
settled with some important Asian customers (other than Chinese
customers), there remains uncertainty in the pricing of spot iron
ore, copper and aluminum," Rio Tinto said.
At 0957 GMT, Rio's shares were down 58 pence, or 2%, at 2842
pence in a broadly weaker mining sector.
Company Web site: www.riotinto.com
-By Jeffrey Sparshott, Dow Jones Newswires; +44 (0)207 842 9347;
jeffrey.sparshott@dowjones.com