Rio Tinto investors vent fury at $20bn Chinalco stake

Private investors in Rio Tinto vented their anger at the mining group's annual meeting in London today over the board's decision to pursue a $20bn (?13.3bn) bailout from the Chinese government. John Farmer, a shareholder, said the deal with state-owned firm Chinalco "could be construed as selling part of the family silver". "Why have you got us into this mire?," he asked. "You are mortgaging part of Rio Tinto to China. It's something you will regret." Outgoing chairman Paul Skinner did not rule out a compromise deal to appease shareholders angry at being shut out from the fundraising. He also admitted "some regrets" about the deal to buy Canadian aluminium firm Alcan for $38bn, almost entirely in debt, at the height of the metals boom. Rio must pay back $19bn on the deal by October next year, but the slump in commodity prices has forced the company to try to raise the money from Chinalco instead. "There are aspects of the future reading of aluminium prices which we did not get entirely right," Skinner said. The Chinalco deal, which requires shareholder approval, would allow the Chinese company to double its Rio stake to 18% and buy large stakes in its best mines in return for a cash injection of up to $19.5bn. Private and institutional shareholders are angry because the deal ignores their pre-emption rights – they should have first refusal on any new shares issued – and would dilute their stakes. Earlier, Skinner had defended the large number of non-executive directors retained by the company – many of them recruited from outside the mining industry. He said they brought outside industry expertise and perspective to board meetings. This prompted the question, which raised laughter: "So how did you miss the financial crisis coming?" The company also said it had raised $3.5bn by issuing bonds, the first time the credit crunch had allowed it to do so since last summer. Rio had to agree a coupon of almost 9% to get the sale away. One elderly shareholder, a former chartered accountant who said he had held shares in Rio since 1962, responded: "I get 0.1% interest from my Barclays ISA, I would be more than happy to get 9%." Another shareholder said: "If such a loan stock was offered to existing shareholders and as an open offer in the UK you would have your arm taken off." Andrew Hickman, another shareholder, criticised the practice of dumping tailings – water containing waste minerals and chemicals – directly into rivers at the Grasberg mine, in a remote forest region of Indonesia. Rio holds a stake in the mine, one of the world's largest copper and gold deposits. Skinner said there was nowhere else to dispose of the tailings. He said Rio did not operate the venture but had many suggestions about how to improve the mine's environmental impact. The Government Pension Fund of Norway, one of the world's largest pension funds, does not invest in Rio or its joint venture partner Freeport because of environmental damage caused by the mine. source:www.guardian.co.uk