rio in talks with chinalco report

January 29, 2009 - 11:44AM
Rio Tinto Ltd, the world's third biggest mining company, is reportedly in discussions with major shareholder Chinalco about a capital injection and asset sales in a bid to reduce its debt.

The debt-laden global miner is in talks with Chinalco, China's largest aluminium producer, about a "multi-billion-dollar capital injection" and the potential sale of assets, according to The Times of London, citing unnamed sources.

The company also is reportedly talking to other parties about asset sales, including sovereign wealth funds.

Rio Tinto is aiming to reduce its $US38 billion ($A57.19 billion) debt by reducing capital expenditure, axing about 14,000 jobs worldwide and increasing asset sales this year.

The company incurred the debt after the $US38.1 billion ($A57.34 billion) acquisition of Canadian aluminium producer Alcan Inc.

China's state-backed aluminium group, Chinalco, and US-based aluminium producer Alcoa, acquired a nine per cent stake in the dual-listed Rio Tinto in late January a year ago for $US14 billion ($A21.07 billion).

Market watchers interpreted the move as a deliberate attempt by Beijing to potentially sour BHP Billiton Ltd's bid for Rio Tinto, which was eventually axed amid the global economic downturn.

Rio Tinto Alcan chief executive Dick Evans said in April that Alcoa and Chinalco were likely to be positioning for asset sales if the BHP Billiton takeover was successful.

Rio Tinto spokesperson Amanda Buckley declined to comment on "market speculation".

Market speculation also is mounting that the company could potentially raise up to $US6 billion ($A9.03 billion) through an equity issue as it looks to retire about $US10 billion ($A15.05 billion) in debt by the end of the year.

Rio Tinto said on Wednesday that it would "not rule out the potential to issue equity as one of the options it has available, if it is determined to be in the best interest of shareholders".

Shares in the company dropped 92 cents to $40.03 by 1318 AEDT on Thursday.