MercoPress. South Atlantic News Agency

BHP Billiton turns down Chinalco offer about Rio Tinto stake

Chinalco hint at sale of Rio Tinto stake

The head of the Chinese company that recently bought a chunk of mining giant Río Tinto said yesterday it was a strategic investment, and hinted his company would consider selling to BHP Billiton if the price was right.

Xiao Yaqing, the president of Aluminium Corp. of China, was in Australia yesterday for meetings with government officials and to brief journalists on the purchase, with Alcoa Inc., of 12 percent of London-based Río Tinto PLC for US$14 billion. The purchase intensified market speculation about the prospects of BHP's US$130 billion informal bid to merge with Río Tinto, a deal that would create a monolithic mining company and that Chinese officials have previously expressed concerns about. Friday's announcement from Aluminum Corp. of China, known by the acronym Chinalco, and Pittsburgh-based Alcoa comes just days ahead of a Wednesday deadline set by British regulators for BHP Billiton to either formalize its proposal or walk away from the share-swap offer. Sydney-traded shares of Río Tinto Ltd. and BHP Billiton jumped as much as 3 percent in early trading before trimming some gains. Río Tinto closed less than 1 percent higher at A$128.11; BHP Billiton ended 2 percent higher at A$39.32. Río Tinto is headquartered in London, but its shares are traded on bourses in both Britain and Australia, as are BHP Billiton stocks. Aluminium Corp. of China shares also surged yesterday, the first time they were traded in Asia since announcement of the Río Tinto purchase. The shares rose the daily 10 percent limit to 32.34 yuan on the Shanghai Stock Exchange, where the main index rose more 8.1 percent. Xiao said yesterday Chinalco's decision to take a stake in Río Tinto reflected his company's confidence in the global economic outlook, the future for metals demand and prices, and the ability of Río Tinto's management to deliver value. Asked if Chinalco would consider selling its stake as part of a BHP bid for Río Tinto, Xiao replied, "if we make money." "The objective of this investment is to make a return. So if the return is attractive ... we'll be happy," he said. He said Chinalco had no current intention to increase its stake in Río Tinto, and deflected a question about the possibility of breaking up Río Tinto by saying he believed the company was well run as it is. On Friday, Chinalco and Alcoa said they reserved the right to participate in a takeover offer for Río Tinto within the next six months. The purchase followed rumours that some Chinese entity might try to block BHP Billiton's unsolicited takeover bid for Río Tinto, which Río Tinto has rejected. Most of that speculation had centered on China's steel industry, which has a critical interest in the world iron ore trade. Steelmakers in China, Japan and Europe have protested BHP Billiton's bid for Río Tinto, contending that a takeover would give it too much influence over global iron ore supplies and pricing. ABN Amro analysts said yesterday the Río Tinto purchase appeared aimed at similar concerns about alumina. "The reason Chinalco and Alcoa have teamed up to try and block the BHP offer for Río is to prevent a structural change in the pricing of alumina," ABN Amro said in a note to clients. Treasurer Wayne Swan confirmed that Chinalco had approached Australian regulator the Foreign Investment Review board about its interest in Río Tinto