Banks Offer Chinalco Financing for Rio Tinto Rights Shares Purchase

飞雪寒冰

Chinalco will be offered financing from China Development Bank and Agricultural Bank of China to buy Rio Tinto Ltd rights shares, a person close to Agricultural Bank told Caijing on June 30.

"Chinalco has decided to participate in Rio Tinto's rights issue," the person, who declined to be identified, added.

Earlier this month, debt-ridden Rio Tinto withdrew from a proposed US$19.5 billion tie-up with Chinalco in favor of a rights issue raising a total of US$15.2 billion.

Rio Tinto said the rights issue would be priced at A$28.29 per share in Australia and 1,400 pence in London, with 21 new shares offered for every 40 shares held.
Based on the current share price, Chinalco needs to invest more than US$1.4 billion in order to maintain its 12 percent stake in the London-listed Rio Tinto Plc stock, according to Caijing calculations.

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Chinalco has a 9.3 percent stake in Rio Tinto overall, including London and Australian stock. It is the single largest shareholder in the Anglo-Australian miner.

Lu Youqing, deputy general manager of Chinalco, told Caijing on June 29 that Chinalco has made a decision on Rio Tinto's rights issue, but declined to elaborate, citing stock market regulations.

Chinalco registered with Rio Tinto for possible participation in the issue before June 15, a company official told Caijing earlier.

After the rights issue, Rio Tinto plans to float new shares on the stock market after July 2.

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Most of the US$15.2 billion will go towards paying down debt, reducing Rio Tinto's obligations to about US$23.2 billion. The company will exceed its pledge in December to cut net debt by US$10 billion by the end of 2009.

The world's third-largest miner said earlier that it remains interested in collaborating with Chinalco due to the importance of the China market.

Chinalco also said it will continue to pursue overseas expansion despite the failure of its Rio Tinto deal.

Rio Tinto Plc closed up 4.51 percent at 2,153 pence on June 29. In Australia, Rio Tinto Ltd. was up 3.52 percent at A$52.04 in June 30 morning trading.