Rio hires new chairman to take up fight for Chinalco agreement

Rio Tinto is set to make a new push to persuade shareholders of the merits of its $19.5bn financing deal with Chinalco, announcing yesterday that it has appointed a new chairman who will champion the arrangement. Jan Du Plessis, currently chairman of British American Tobacco, is to replace Paul Skinner as Rio's chairman in April, the mining giant said. Mr Du Plessis is Rio's second attempt at replacing Mr Skinner in as many months. Last month, Jim Leng, Mr Skinner's then deputy, quit the miner's board just days after agreeing to become chairman, following a bust-up over whether the Chinalco deal was a better option for fundraising than a rights issue. Mr Du Plessis, a 55-year-old South African national, who will continue for now as chairman of BAT, a post he has held since 2004, has relatively little experience of the mining sector, having only joined the company's board as a non-executive director in September. Crucially, however, Mr Du Plessis said yesterday that he backed Rio's position that the Chinalco agreement was its best bet as a strategy for weathering the global downturn. Nevertheless, the Chinalco deal remains controversial. Designed to help Rio reduce its $39bn debt burden, the deal has sparked political concerns in Australia about key mining assets falling into Chinese hands and complaints from investors both in Australia and the UK who say Chinalco is being favoured over other shareholders by the terms of the deal. Under the deal, the state-owned Chinalco would pay $12.3bn for stakes in Rio's iron ore, copper and aluminium assets and $7.2bn for convertible notes that would double its equity stake in Rio to 18 per cent. "I am not sure the appointment of anyone would make getting the Chinalco deal through a shoo-in," said Richard Knights, an analyst at the stockbroker Numis. "There will be some objection from shareholders, and even from politicians." One Australian politician took out television ads yesterday to push for the Chinalco deal to be blocked. "The Australian government would never be allowed to buy a mine in China. So why would we allow the Chinese government to buy and control a key strategic asset in our country?" Senator Barnaby Joyce said in adverts aired in Canberra and in his home state of Queensland, where Chinalco will get stakes in assets. For the deal to go ahead, Australia's Treasurer needs to approve it on national interest grounds. On Monday, Australia's Foreign Investment Review Board, which advises the Treasurer, Wayne Swan, extended its review of the complex deal for up to 90 days, moving the deadline to June. Another hurdle is that the Australian Senate is expected to endorse an inquiry into whether foreign investments in Australian companies are in Australia's national interest. Assuming it gets legal approval from Australia, Rio Tinto plans to put the deal to a shareholder vote in an ordinary resolution, meaning it would need support from a simple majority for the deal to go ahead. However, British shareholders have said that the scope of the proposal, which would give Chinalco two seats on the board and joint venture rights on key assets, meant that Rio should put up a special resolution, which would require 75 per cent support. Rio Tinto is understood to be considering whether to do so. Mr Du Plessis' appointment will allow Mr Skinner to leave the company in April, as he had originally planned. The move will put him back on the job market, where he had been mooted to take over as chairman of the oil giant BP, although a source there played down the chances of his returning to the fray.