Rio Tinto yesterday defended its planned $19.5bn capital injection from Chinalco, the Chinese state-owned metals group, as criticism of the deal intensified from the mining group’s UK shareholders.
Heavily-indebted Rio has proposed selling minority stakes in some of its best assets, including the Hamersley iron ore mine in Australia and the Escondida copper mine in Chile, to Chinalco to raise $12.3bn. It is also raising $7.2bn through an issue of bonds to the Chinese group that can be converted into equity, increasing its stake in Rio from 9 per cent to as much as 18 per cent.
Paul Skinner, Rio chairman, said this was the best way for the group to solve its financial problems, as well as opening up future mining opportunities for Rio in China. He said the Rio board had decided unanimously this week to pursue the deal with Chinalco, headed by Xiao Yaqing. “We probably could have raised $10bn or thereabouts from a rights issue, but I don’t think we could have raised $20bn,” Mr Skinner said.