Skirmishing for B.C.'s Alcan assets

HONG KONG -- Ultimate ownership of the B.C. assets of former Canadian miner Alcan is hanging in the balance after Australian regulators approved the Chinese acquisition of a stake in Rio Tinto -- the company that bought Alcan last year -- a move that threatens to block a rival $143-billion US takeover bid for Rio Tinto. Chinalco, China's largest aluminum producer, paid $14 billion for a piece of Rio Tinto in February in a joint raid with U.S. miner Alcoa, which had previously been a suitor for Alcan. The move followed BHP Billiton's offer to buy out Rio Tinto in a 3.4-for-one all-share offer. Industry sources said Alcoa still wants to get its hands on the Alcan assets, which include operations in B.C. and Quebec, that it tried to purchase last year before Rio Tinto acquired Montreal-based Alcan. By investing in Rio Tinto, Alcoa has positioned itself to become a key player in the BHP-Rio Tinto takeover battle, where it hopes some assets could go up for sale by one of the two companies. Chinalco's raid has been under the scrutiny of the Australian Treasury, which has given its approval for the partly state-owned company to take a stake equivalent to 11 per cent of Rio Tinto's shares, which are listed on exchanges in London and Sydney, Australia. Chinalco's acquisition of a chunk of Rio Tinto -- the largest single foreign investment made by a Chinese company -- is seen as an attempt by Beijing to block the BHP bid. The Chinese government is understood to be concerned a BHP-Rio Tinto merger could lead to a rise in the price of raw materials needed to support China's ongoing economic growth. A fused BHP and Rio Tinto would control about 35 per cent of the global iron-ore market. Chinalco, which has suffered lately from rising input costs, power shortages and the impact of a series of natural disasters on production levels, is thought to be interested in any aluminum assets that may be sold off if BHP buys Rio Tinto. While it remains to be seen whether most of the former Alcan assets end up in the hands of a U.K., Chinese or even a U.S. owner, Rio Tinto is in the midst of plans to sell off $10 billion in assets to help pay off the debt it incurred to buy Alcan for $38.1 billion US last year. The assets potentially under the hammer include Alcan's packaging and engineered products division, which could raise up to $5 billion. However, Rio Tinto has shown no interest in selling Alcan's low-cost smelting operations that would be of the most interest to Alcoa. Rio Tinto is holding a news conference in Vancouver on Thursday to announce a labour deal that will form a key part of its proposed $2-billion upgrade of the Kitimat aluminum smelter. The upgrade, if it proceeds, is expected to create up to 1,000 construction and related jobs over the next five years and ensure about 1,000 smelter jobs stay in Kitimat. -Canwest News Service