June 5, 2009

Rio Tinto breaks off $19.5B Chinalco deal

Mining giant Rio Tinto said Friday said it had broken off a politically unpopular $19.5 billion deal with the Chinese government-owned Chinalco.

Xiong Weiping, president of Chinalco, the state-owned Aluminum Corp. of China, said we are very disappointed with this outcome, The New York Times reported.

The deal would have increased Chinalco's share in the Tinto, an Australian-British company, from 9.3 percent to 18.5 percent. As a consequence, it was sharply criticized in Australia, especially as the global recession has slowed and Tinto's share values have increased, the newspaper said.

A recent television ad said Prime Minister Kevin Rudd was bear(ing) gifts to the Chinese military regime by allowing control of strategic mineral resources in Australia.

Rudd said politics did not derail the deal, the Times said.

After a meeting in London, the Tinto board said it would issue stock and form a venture with BHP Billiton to raise about $20 billion.

It would also pay Chinalco a fee of $195 million to break off the deal, which was originally struck in February.