Chinalco Is Pressing on With $19.5 Billion Rio Deal

May 4 (Bloomberg) -- Aluminum Corp. of China is pressing ahead with its planned $19.5 billion investment in Rio Tinto Group, after the Financial Times reported that it may be offered less convertible debt. “We haven’t received any official request to change the original plan so far, so we’re proceeding with it,” Vice President Lu Youqing said today in a phone interview. “It is natural for shareholders to have this or that concern.” Rio shares rose 4.9 percent in Sydney, taking their gain to 29 percent since the $19.5 billion investment deal with Chinalco, as state-owned Aluminum Corp. is known, was announced on Feb. 12. The Financial Times said London-based Rio, the world’s third- largest mining company, may seek to reduce the convertible debt it’s selling to Chinalco and offer about $3 billion to other holders to broaden participation. “Some parts of the deal are untouchable and some are clearly prone to fine-tuning,” said Tim Schroeders, who helps manage A$1 billion ($736 million) at Pengana Capital Ltd. in Melbourne. “Things like the level of debt instruments or convertible bonds that they issue, the volume and the coupon of those bonds are probably negotiable without crushing the deal. The direct asset deals are probably not negotiable.” Rio Tinto spokeswoman Amanda Buckley declined to comment when contacted in Melbourne. Deal Probability The probability of Chinalco completing the investment in Rio, which includes the bond sale as well as buying stakes in Rio’s mines, is below 50 percent, Liberum Capital Ltd. said last month, citing a rebound in financial and commodity markets. Rio will consider selling shares, bonds, assets and or reschedule its debt should the deal fail, Chief Financial Officer Guy Elliott has said. Chinalco, already Rio’s largest shareholder, has agreed to buy $7.2 billion of convertible debt and stakes in Rio’s projects worth $12.3 billion. If the investment is approved by Australia and Rio shareholders Chinalco will own 18 percent of the dual-listed company should it convert the debt. Rio Chief Executive Tom Albanese was forced to seek a deal to help reduce as much as $38.9 billion of debt largely incurred from buying Canadian aluminum producer Alcan Inc. Rio’s debt was one of the reasons why BHP Billiton Ltd. abandoned its $66 billion hostile bid for Rio in November.