Rio Tinto expected to announce deal with Chinalco as early as Thursday

By Ross Marowits, The Canadian Press MONTREAL - Global miner Rio Tinto (NYSE:RTP) confirmed Wednesday, just a day ahead of announcing its 2008 financial results, that it is in talks with Aluminum Corp. of China. Rio's admission was issued amid media reports that the Chinese company, also known as Chinalco, will inject US$19.5 billion into the London-based mining company, which is stuggling to lighten a heavy debt assumed to make its US$38.1 billion acquisition of Alcan. Reports ahead of Rio's fourth-quarter and year-end financial report to be issued Thursday suggested Chinalco would buy US$7.2 billion in convertible bonds and US$12.3 billion in strategic partnerships with Rio in copper, aluminum and iron ore. "Rio Tinto notes continued media speculation in connection with a possible transaction with Chinalco and confirms the parties are in negotiations, which may or may not lead to any agreement being reached," Rio Tinto (NYSE:RTP) said in a statement late Wednesday. Chinalco already has a nine per cent stake in Rio Tinto and could significantly raise its share of the Anglo-Australian miner with a large purchase of convertible debt, which can be exchanges for shares. U.S.-traded shares of Rio Tinto were halted Wednesday on the New York Stock Exchange at US$112.80, after climbing $5.43, or 5.1 per cent earlier in the session. The Chinalco deal is believed to be behind the surprise decision of Jim Leng to withdraw from his appointment to be Rio chairman. Analysts expected Rio to mark the peak of the commodity boom by reporting about US$9.4 billion of annual net profits in 2008 - before writedowns on its acquisition of Montreal-based Alcan, which is now the core of Rio's aluminum business. Charles Kernot of Evolution Securities said he's much more interested in Rio's ability to raise money to cover its US$8.9 billion Alcan debt repayment due in October than in Rio's 2008 earnings. "This is going to be the last set of good results from the company reflecting high commodity prices that we saw during 2008 and the results for 2009 are likely to be significantly lower," Kernot said from London. Kernot said Rio Tinto needs to raise US$20 billion over the next two years from a mixture of asset sales, cash generation and external capital. Rio Tinto is looking to sell up to $15 billion of assets, including Alcan's packaging and engineered products division. Australia's Amcor Ltd. recently confirmed it may be interested in buying some of the Alcan Packaging business.