Thursday, February 12, 2009

Chinalco to invest $19.5 billion in Rio Tinto: source

HONG KONG/MELBOURNE (Reuters) – Mining group Rio Tinto (RIO.L) (RIO.AX) has agreed to a $19.5 billion cash injection from China's state-owned Chinalco in a deal aimed at cutting Rio's debts, a source familiar with the deal said on Thursday.

The deal involves Chinalco spending $12.3 billion on stakes of 15-50 percent in nine assets owned by Rio, the source said. It would also buy $7.2 billion of bonds convertible into shares of Rio, the world's largest maker of aluminum, second-largest iron ore miner and a top-five copper producer.

Chinalco, looking to secure resource supplies to feed a growing economy, would double its Rio stake to 18 percent from the 9 percent it bought with U.S. aluminum giant Alcoa (AA.N) a year ago.

The plan is likely to face close scrutiny from the Australian government, which last year said Chinalco would need prior approval if it wanted to raise its stake in Rio above 15 percent of the group's London shares. Australian investors and media were already criticizing the reported deal on Thursday.

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