By Don Miller
Rio Tinto PLC (ADR:RTP) appointed a new chairman yesterday (Tuesday) in what was
seen as an effort to calm political turmoil in Australia over its $19.5 billion
tie-up with China’s Aluminum Corp. of China Ltd. (ADR: ACH), also known as
Chinalco.
Rio entered the agreement with Chinalco in February to help cut its $39
billion debt burden, but the deal has ruffled political feathers in Australia on
concerns key assets are falling into Chinese hands.
After a previous attempts failed, Rio appointed Jan du Plessis, chairman of
British American Tobacco PLC (BAT), as its new chairman. Rio chairman-elect Jim Leng quit
the board last month, after objecting to the deal.
Du Plessis is on record as viewing the deal as the best chance for Rio to
weather the global downturn.
Under terms of the agreement, state-owned Chinalco would pay $12.3 billion
for a piece of Rio’s iron ore, copper and aluminum mining assets, and $7.2
billion for convertible notes that would double its stake in Rio to 18%.
In its annual report released Tuesday, Rio said it might have to renegotiate
$40 billion in debt under potentially more onerous terms if the Chinalco deal
was not approved and it failed to complete other planned asset sales.
But that did little to deter Senator Barnaby Joyce, an Australian politician
who took out television ads on Tuesday urging that the Chinalco deal be blocked,
Reuters reported.
“The Australian government would never be allowed to buy a mine in
China. So why would we allow the Chinese government to buy and control a key
strategic asset in our country,” the ads said. The ads aired in the capital
of Canberra and Joyce’s home state of Queensland, where Chinalco will mine new
assets.
On Monday, Australia’s Foreign Investment Review Board extended its
examination of the deal by 90 days, an investigation that could make the deal
even more difficult.
