Rio Tinto still wants to do Chinalco deal

Global miner Rio Tinto still believes that its planned $19.5 billion (12.9 billion pound) tie-up with Chinese state-owned metals firm Chinalco makes sense, Rio's head of strategy Doug Ritchie said on Thursday. Investors have been speculating Rio might have to revise the deal after its shares last week climbed above the $45 conversion price on the first of two tranches of convertible notes that would be issued to Chinalco under the February deal. "I see no reason why not. It's a volatile market out there and we've got another couple of months before our shareholders will need to vote on it," Ritchie told reporters when asked whether the logic of the deal remained. "Many things can change, so we'll just wait and see how it goes," he said after a speech to a business lunch. Chinalco agreed in February to buy $12.2 billion worth of iron ore, copper and aluminium asset stakes and $7.3 billion worth of convertible notes that would double its equity stake in Rio to 18 percent. Some major Rio shareholders have complained that the deal favours one shareholder and want to be able to take part in the capital raising, adding to speculation the deal may be revised. Australia's Foreign Investment Review Board is due to hand its recommendation on whether the deal should be allowed to proceed to Treasurer Wayne Swan by mid-June. Swan will have the final say on its fate. Rio Tinto plans to put the deal to a shareholder vote if Swan approves it. Ritchie dismissed speculation that former suitor BHP Billiton was talking to Rio about a tie-up of their Western Australian iron ore operations, as the Australian Financial Review business daily reported on Thursday. "I read the story in today's Financial Review -- very nice story. Nothing to it." Pressed on whether there had been any discussions with BHP, he said: "As I suggested, not in recent times." He added that BHP's takeover bid, aborted last November, had focussed on trying to link up the two companies' Pilbara iron ore operations in western Australia. Ritchie said just because equity and debt markets were showing signs of improving and China's stimulus spending was starting to bite, that did not mean Rio's prospects had suddenly improved, noting that Japan, another major customer, had "fallen off a cliff." "To say that the equity markets have kicked along, that some of the debt markets are starting to open up in some respects, that therefore we've put everything behind us and it's back to business as usual is just one step far too far to take." (Reporting by Sonali Paul and Simone Giuliani; Editing by Jonathan Standing)