Chinalco to meet FIRB over Rio deal

China's state-backed Chinalco has stressed its investment in Rio Tinto Ltd won't
give the company control over Australia's resources or influence over commodity
pricing.
Chinalco president Xiong Weiping will meet Foreign Investment Review Board (FIRB)
officials on Tuesday to discuss "concerns" they may have with the $US19.5 billion
($A30.64 billion) Rio Tinto deal.
Mr Xiong, who was appointed Chinalco president last Thursday, stressed his company
was run independently of the state and would not have undue influence over Rio Tinto
management.
"Our partnership will in no way change the corporate strategy of Rio Tinto, or the
way it operates its business, or the pricing of its product," Mr Xiong told
reporters in Sydney, in his first media engagement outside China since his
appointment.
"This transaction will in no way lead to any control of the natural resources in
Australia."
Chinalco has agreed to pay $US12.3 billion ($A19.32 billion) for a number of Rio
Tinto's iron ore, aluminium, bauxite and copper assets, and provide $US7.2 billion
($A11.31 billion) for convertible bonds.
The Rio Tinto board has recommended the transaction unanimously, allowing Chinalco
to appoint two new non-executive board members and increase the company's stake in
the dual-listed miner from nine per cent to 18 per cent.
Mr Xiong said Chinalco had no immediate plans to increase its planned stake in Rio
Tinto, or to on-sell assets or its share of the miner, should it be approved and the
transaction completed.
The Chinalco transaction has drawn the ire of Rio Tinto's British investors,
however, who have expressed disquiet over not being offered the chance to
participate in a rights issue.
Rio Tinto chief executive Tom Albanese, who is based in the UK, reportedly has
delayed earlier trips to Australia in order to meet and deal with the
dissatisfaction from Rio's biggest UK investors.
Rio spokeswoman Amanda Buckley said Mr Albanese was currently in Australia meeting
with local investors over the Chinalco deal and a range of other issues.
Mr Albanese met with analysts in late February to discuss the transaction and said
Rio Tinto did not believe Chinalco's involvement would affect iron ore price
negotiations or new investments and supply.
Merrill Lynch analysts, led by Olivia Ker, said the transaction had near-term
benefits by resolving Rio Tinto's immediate debt issues, but that the deal posed
"substantive longer-term risks".
"Corporate independence would be impaired by a major customer securing 18 per cent
of issued shares," Merrill Lynch said in a note to clients.
Mr Xiong said on Monday the deal had been negotiated between Chinalco and Rio Tinto
over a "matter of months" and the company did not want to see any changes to the
transaction terms.
"This transaction is beneficial not only to the parties involved here but also to
Australia, we hope the Australian government will approve this transaction," Mr
Xiong said.
Federal treasurer Wayne Swan said last month that proposals like the Chinalco deal
would be analysed "seriously" and in a considered way and a decision would be made
in the "Australian national interest".
Federal Opposition Leader Malcolm Turnbull has questioned whether accepting Chinese
investment is the best way for Rio Tinto to reduce its debt.
"Rio has some very big financial challenges - it needs to raise money to reduce
debt," Mr Turnbull told AAP on Monday.
"There are a lot of questions as to whether this is the best way for it to do so."
Mr Turnbull said he was still seeking information on the details of the deal.
Rio Tinto will use the capital injection to help tackle the $US38 billion ($A59.7
billion) mountain of debt it incurred buying Canadian aluminium producer Alcan Inc
in 2007.
Mr Xiong said the immediate objective was to complete the Rio Tinto deal, but he
said Chinalco would be interested in other Australian mining companies that fitted
its development strategy.
Rio Tinto shares dropped $3.02, or 6.39 per cent, to $44.23 on Monday.