Rio Tinto may raise cash by selling stake in Chinese joint venture

SANYA, China: Rio Tinto may raise much-needed cash by selling its stake in a joint venture with a Chinese aluminum company whose co-owner is preparing for a takeover, sources in the two companies said. Rio's joint venture partner, the state-owned Qingtongxia Aluminum, is set to be taken over by another state-owned company, China Power Investment, to form China's second-biggest producer of aluminum after Chalco, said the sources, who declined to be identified because they were not authorized to speak to the media. "China Power is assessing our assets," said an official at Qingtongxia, who did not want to be identified because of the sensitivity of the information. Qingtongxia was in talks with Rio Tinto to buy back all the shares it currently did not own in the joint venture, the Qingtongxia smelter, to consolidate its assets before the takeover, according to an official at Qingtongxia and a source at China Power. A Rio Tinto spokesman in London, Nick Cobban, said the company declined to comment for now. Today in Business with Reuters Central banks cut rates in struggle to spark economy Thousands more lose investment bank jobs Sarkozy announces €26 billion stimulus plan for France Rio Tinto acquired half of the smelter, which is controlled by the government of the Ningxia region, when it bought the Canadian aluminum firm Alcan for $38 billion last year, a deal that has left it struggling with $40 billion in debt. Rio has pledged to raise $15 billion in asset sales but has raised just $3 billion so far. When BHP Billiton abandoned its hostile bid for Rio last month, punishing Rio's shares, the firm was faced with the challenge of selling assets while the market for its products collapsed in the global financial slowdown. Under the consolidation plan, the government of Ningxia would transfer its majority stake in return for billions of yuan in investment aimed at bolstering the local economy in the remote northern Chinese region. After completion of the takeover, China Power would buy coal mines and build power plants to supply electricity for aluminum production at the smelter, the Qingtongxia official said. China Power and Qingtongxia were also building an aluminum smelter in Ningxia with a capacity of 1.08 million tons a year. Construction of the facilities for the first 270,000 tons of capacity was almost finished and production might start in the next few months. Source: iht.com