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Rio may sell stakes to China to reduce debt

RIO Tinto may consider selling stakes in key projects to China to pay off some of its $US42 billion ($67 billion) in debt next year.

Chairman Paul Skinner yesterday urged the Australian Government to be open-minded about foreign ownership.

Speaking in Melbourne, he said Rio was not likely to announce any changes to its expansion plans until after BHP Billiton's $US80 billion bid goes live in January.

Asked if Rio might sell project stakes to China to pay the $US9 billion of debt due next year, Mr Skinner said this was "in theory, an option", although not one that had been developed at this stage.

He also told reporters the company was not in talks to sell stakes in Pilbara iron ore assets.

Speaking earlier to the Australian British Chamber of Commerce, he backed up chief executive Tom Albanese's remarks to the Melbourne Mining Club last month -- that Australia should not block Chinese investment.

"I wonder how much smaller the Australian mining industry would be today if it had not welcomed investment from Japan and Korea a few decades ago," Mr Skinner said.

He said the Foreign Investment Review Board should encourage state-owned investment, provided it was well scrutinised.

A much-anticipated review of Rio's growth plan would not be released until next year.

The European Union is due to rule on BHP's bid on January 15, but it could delay the announcement by a few weeks.

Mr Skinner said Rio's Pilbara iron ore expansions would be looked at closely. "We are not going to do anything that compromises the ability of the organisation to grow. Because iron ore is a key component (of growth plans) we'll pay particular attention to that aspect."

Rio's shares fell yesterday, while BHP's bounded ahead in a rare divergence. BHP rose $1.39, or 6.4 per cent, to $23.38, while Rio dropped 21c, or 0.4 per cent, to close at $59.80. The move left a Rio share worth 2.57 BHP shares, well down from BHP's 3.4-for-one scrip offer, and at a 25 per cent discount to the offer's implied value.

Mr Skinner said he had no plans to meet BHP officials while he was in Australia.

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