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UPDATE 1-Chinalco blames Rio, not Australia

Published 06/11/2009, 04:42 AM
Updated 06/11/2009, 04:56 AM
RIO
-

* Australia had "open and welcoming" attitude

* Chinalco offered concessions to sweeten Rio deal

* Chinalco offered cut in Rio stake, halved Hamersley stake

* Sticking points included Rio board seats

(Adds quotes, details)

By Michael Wei and Tom Miles

BEIJING, June 11 (Reuters) - Chinese metals conglomerate Chinalco felt Australia had an "open and welcoming" attitude to its failed $19.5 billion bid to invest in Rio Tinto, Chinalco President Xiong Weiping said on Thursday.

The deal collapsed last week because of factors beyond Chinalco's control, with disagreements on board seats and a convertible bond issue, and despite its offer of several amendments after the terms were thrashed out in February, Xiong said.

Among the concessions, Chinalco would accept a lower stake in Rio than the original 18 percent, give ground on the convertible bond, simplify the agreed marketing structure for iron ore and halve its proposed stake in Rio's Hamersley iron ore mine from 15 to 7.5 percent.

"We believe these are very significant concessions and amendments to the original transactions and they should be sufficient to meet the requirements of both the shareholders and the Australian regulators," Xiong told reporters at a briefing at Chinalco's head office in Beijing.

Chinalco failed to resolve the question of representation on Rio's board. But it did not blame Australia's government, which has been under the investment spotlight because of its stringent process for accepting foreign investment.

"In the process of this transaction, Chinalco has also felt the open and welcoming attitude from the Australian government towards foreign investment, including from China," Xiong said.

"China and Australia have established a good cooperative business relationship over the last few years. As a Chinese company, Chinalco hopes this relationship will last and further develop."

Rio ditched Chinalco, at the cost of a $195 million breakup fee, in order to team up with its fellow British-Australian miner BHP Billiton.

The two will form a joint venture in iron ore, linking up two of the world's top three suppliers of the raw material, which is shipped to China in massive volumes to feed the world's biggest steel industry.

Xiong declined to say if Chinalco wanted to take a stake in that joint venture.

"We've never received any proposals inviting us to take part in other deals, so we can't talk about accepting or declining."

Xiong cited several factors that were beyond Chinalco's control and contributed to the break-up of the Rio deal: metals market changes, Rio's share price rise, the requirements of Rio's shareholders, Rio's planned share placement and the BHP joint venture.

Chinalco, which is Rio's largest shareholder with a 9 percent stake, has not yet decided whether to subscribe to Rio's planned rights issue, but was studying all the possibilities, Xiong said.

He reiterated that Chinalco was "very disappointed" and said the deal had represented a good value-creating opportunity for Rio, improving its market image and boosting its shares.

Chinalco will stick to its strategic goal of becoming a global diversified mining company, he said.

(Reporting by Michael Wei and Tom Miles; Editing by Ken Wills)

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