Rio boss says Chinalco deal gaining support-report
Wednesday, Mar 04, 2009
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SYDNEY, March 4 - Rio Tinto shareholders are warming to the miner's proposed $19.5 billion tie up with China's top aluminium maker Chinalco, Rio Chief Executive Tom Albanese told Australian media. "In the past three weeks in all the markets there is a greater recognition about the value proposition and that a larger financial solution is better than a smaller financial solution," Albanese told the Australian Financial Review in an interview published on Wednesday.
Rio agreed the deal with Chinalco, which involves selling asset stakes and an issue of convertible bonds to Chinalco, in order to reduce a debt burden close to $40 billion, taken on after Rio's purchase of Alcan in 2007. In a separate interview with The Australian paper, Albanese said the main alternative to the Chinalco deal, a rights issue, could have raised $10 billion but would have been at a 70 percent discount to its Australian shares and a 60 percent discount to its UK-listed shares.
Some shareholders have been angered that they did not get the opportunity to take part in the capital raising.
Albanese said in the AFR interview that the Chinalco deal would allow Rio to look to future growth opportunities instead of just focusing on strengthening the balance sheet.
He also said there was no evidence as yet that economic stimulus measures in China had boosted iron ore demand.
Albanese is expected to lobby the Australian government for foreign investment approval for the deal while he is in the country, though he would not say whether he would meet with Treasurer Wayne Swan.
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