MercoPress. South Atlantic News Agency

China doubles stake in debt-pressed miner giant Rio Tinto

Anglo-Australian miner Rio Tinto has announced that China's state-owned Chinalco is to invest a further 19.5 billion US dollars in the business. The move - China's largest investment in a foreign company - could see Chinalco increase its stake in Rio to 18% from the current level of 9%.

The news came as Rio Tinto reported a 7% fall in 2008 profits to 9.2 billion. Global commodity prices hit record highs last summer before falling back sharply as the world economy slumped. Rio Tinto said the fresh investment from Chinalco "creates a pioneering strategic partnership". The deal will also allow Rio Tinto to reduce its debts, which are estimated at 39 billion. Chinalco's 19.5 billion investment is made up of 12.3 billion being spent on stakes in nine of Rio's mining assets, and 7.2 billion on Rio bonds that can be converted into shares. The announcement comes three days after Rio said non-executive director Jim Leng, who had been about to take over as chairman of the firm, had resigned. Mr Leng quit after disagreeing with the board about how Rio should tackle its debt burden. Some analysts questioned the timing of the deal, seeing as it comes at a time when commodity prices are low because of the weak global economy. BBC business editor Robert Peston said this was only one way in looking at the announcement, and that in other respects Rio had got a good deal. "Rio is securing a 60-year loan from the Chinese," he said. "It's selling a right to buy its shares in the future at a massive premium to the prevailing share price." Last year Rio rejected an informal 66 billion takeover approach from rival BHP Billiton, which is also an Anglo-Australian company. Rio Tinto also announced in December that it was cutting 14,000 jobs to reduce its debts by 10 billion.