MercoPress. South Atlantic News Agency

Alcoa and China up stakes in mining premier league

China has teamed up with US aluminum giant Alcoa to buy a 12% stake in Anglo-Australian miner Rio Tinto for 14 billion US dollars. The state-owned Aluminum Corp of China (Chinalco) said the purchase was the largest Chinese investment overseas.

The move could stall efforts by the world's largest miner, BHP Billiton, also Anglo-Australian, to buy Rio. Alcoa said it contributed 1.2 billion US dollars to the total investment. Aluminum Corp. of China, the country's biggest maker of both aluminum and alumina, said it made its purchase through a Singapore-based wholly owned unit called Shining Prospect Pte. The two companies said in a regulatory filing that they did not "currently intend to make an offer for Rio Tinto PLC", though they reserved the right to announce an offer or participate in an offer within the next six months. "Our acquisition of a significant strategic stake in Rio Tinto PLC today reflects our confidence in the long-term prospects for the rapidly evolving global mining sector" Xiao Yaqing, president of Aluminum Corp. of China said in a statement. London-based Rio Tinto became the world's biggest producer of aluminum and bauxite with its 39.7 billion US dollars purchase last year of Montreal, Canada-based Alcan. State-owned Aluminum Corp. of China owns a 38.56% stake in listed unit Chalco, whose shares are traded in New York, Hong Kong and Shanghai. Aluminum Corp. of China said its share of the 14 billion US dollars purchase was partially funded by the China Development Bank, a Beijing-based bank set up mainly to finance government projects. The purchase followed widespread rumors that a Chinese entity might try to block BHP Billiton's unsolicited takeover bid for Rio Tinto. However, most of that speculation had centered on China's steel industry, which has a huge stake in the world iron ore trade. Xiao said the purchase of the stake in Rio Tinto demonstrated its belief in the company's fundamental value. It also underlines his company's "determination to increase and diversify its exposure to the sector and to be well-positioned within this changing industry landscape," he said. Analysts said the two aluminum producers want to block a combined firm that would control a third of the iron ore market and dominate markets for copper, aluminum and coal. Like many major Chinese industry groups, Chalco has been rapidly expanding internationally, acquiring resource assets in Australia, Canada, Peru, Fiji and Guinea. Pittsburgh-based Alcoa, the world's third-largest aluminum maker, also has been expanding, in fast-growth markets such as Brazil, China and Russia. "We have long believed that Rio Tinto has a world-class portfolio of assets and is very well positioned to prosper in the current mining cycle" Alain Belda, Alcoa's chairman and CEO said in a statement. Belda described the partnership with Chalco as one that would "allow us to mutually benefit from developments in the sector". Rio Tinto has rejected BHP Billiton's offer for buy Rio Tinto for about 130 billion US dollars in a share swap. Britain's takeover regulator has given BHP Billiton until Feb. 6 to either formalize its proposal to buy Rio Tinto or say it is not interested. Rio said the investment by Alcoa and Chinalco reinforced its view that BHP's offer was too low. BHP Billiton's spokeswoman, Samantha Evans, said the company had no comment.