Chinalco takes up Rio rights deal
Rio Tinto saw a 97% take-up of its recent rights issue, with Chinalco maintaining the size of its stake in spite of the recent failed deal between the two groups
The rights issue was launched in order to pay down up to $15bn of the $38.7bn debt accumulated from the takeover of Canadian aluminium group Alcan. If successful, the rights issue should largely cover the debt due at the end of this year and next.
Chinalco has a 9% shareholding in the mining group and remains its largest shareholder. It said it did not want to dilute its ownership and will continue to ‘explore opportunities’. Rio Tinto pulled away from a $19.5bn investment package from Chinalco last month, instead forging an iron ore joint venture in the Pilbara region of Australia with BHP Billiton. The deal is expected to generate considerable savings, though China has threatened to use antitrust laws to block it.
Rio’s shares took a knock in early trading, dipping 1.69% to 2,121.5p. They have been rising steadily since the start of the year from lows of below 1,000p in the expectation that commodities groups will be among the early beneficiaries of an economic recovery. However, they remain a long way from the highs of nearly 6,000p in early 2008.
The abandoning of the Chinalco deal and new BHP tie-up were welcomed by markets and this has also helped to pull up the share price. Most analysts believe that this was the best strategy for the group’s long-term future.