Aluminium Corp of China (Chinalco) plans to lift its stake in Rio Tinto to at least 14.99 percent, Chinalco vice president and spokesman Lu Youqing said on November 25, after BHP Billiton said it was abandoning a $66 billion bid to buy Rio Tinto.
State-owned metals firm Chinalco, the parent of listed aluminium producer Chalco, teamed up with US aluminium firm Alcoa Inc at the end of January to buy about 9 percent of Rio Tinto for $14 billion, seen by analysts at the time as posing an obstacle to BHP's bid for Rio.
Lu said Chinalco was now aggressively preparing to raise its Rio stake to the 14.99 percent level approved by Australian regulators. "I cannot say when, because it will affect the price of Rio shares," Lu said.
Gaining 14.99 percent was the first step in Chinalco's plan to buy Rio's shares, he said, adding that the Chinese firm had confidence in Rio's assets and management. "There will still be room for buying more Rio shares. After completing the purchase of 14.99 percent, we may apply to buy more if we see that is a good buy," Lu said.
Lu said Chinalco might consider seeking as much as 49.99 percent of Rio, but that was an idea that had been suggested by investment bankers and was not the company's policy. "Some company leaders are considering 49.99 percent," Lu told Reuters by phone. Later, Chinalco issued a statement to clarify its stance.
"Chinalco has not made any decision in respect of its investment options in Rio Tinto, including the possibility of increasing its holding above 15.00 percent," it said. On the possibility of merging Chinalco and Rio, Lu said: "This may be difficult because of legal issues. The Chinese government would not want us to be controlled, and the Australian government would not want Rio to be controlled." But Lu said he did not rule out a possibility of such a merger in the future, given changing market conditions.
Asked if Chinalco wanted to become a majority shareholder in Rio, he said: "We would certainly want to." Lu said Chinalco was increasing its funds amid the tough financial situation, and planned to save up to 60 billion yuan ($8.8 billion), excluding funds for buying more Rio shares.
Lu said BHP's decision to pull out of its bid for Rio was good for the two Anglo-Australian mining giants and for Chinalco as the companies would focus on their own development. "BHP's decision is the right one," Lu said.
For now Chinalco was not considering buying a stake in BHP, even though it was a good company, he said. It might consider doing so if its plan to take a higher stake in Rio was barred. Chinalco's investment in Rio - China's biggest overseas purchase ever - prompted regulators in Australia, which has strict foreign ownership rules, to launch a review of the deal.