Rio Rating Cut to ‘Sell’ by Goldman on Debt, Aluminum

March 18 (Bloomberg) -- Rio Tinto Group, the third-largest mining company, had its rating cut to “sell” from “hold” by Goldman Sachs JBWere Pty because of its “problematic” debt and forecast aluminum losses. “The outlook for aluminum is weak and we are forecasting losses in this division for the next two years,” analysts led by Neil Goodwill said in a report dated yesterday. The company has about $38 billion in debt, it said. Australian lawmakers may today vote for an inquiry into the nation’s foreign investment laws amid mounting criticism from Rio shareholders on last month’s $19.5 billion funding deal with Aluminum Corp. of China, or Chinalco as the state-owned company is known. Australia’s foreign investment regulator this week extended a probe into the deal by as much as 90 days. “There is a risk that the Chinalco deal isn’t approved,” Goldman said in the report. “As much as we don’t like the Chinalco deal, if it’s not approved now (after being supported by management and the board), and without an attractive alternative, we would see this as negative for the share price.” Rio fell 4.3 percent to A$49.79 at 10:25 a.m. Sydney time on the Australian stock exchange. To contact the reporter on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net