Chinalco says its US$14-billion purchase of a 12-percent stake
in Anglo-Australian mining giant Rio Tinto is a strategic
investment, and it may sell the holding in future to make a
profit.
The market has seen Chinalco's buy-in partnership with Alcoa Inc
as a blocking move while BHP Billiton, the world's largest mining
company, makes a play to buy Rio Tinto.
Chinalco President Xiao Yaqing said in Sydney yesterday that the
company could sell the stake as part of BHP bid for Rio if the
investment makes money. This echoes some analysts' view that
Chinalco's buy should be a safe play as BHP may sweeten its offer,
from which Chinalco could take a profit.
Melbourne-based BHP now has to table a formal offer for Rio
before a Wednesday deadline under UK takeover rules, or it has to
wait six months before trying again. Rio has rejected BHP's initial
offer of three of its shares for every Rio share, in a deal worth
about US$130 billion, saying it undervalues the company.
Xiao reaffirmed that Chinalco won't raise its stake and said the
deal is part of its strategy to become a diversified mining
company. According to news wires, Xiao declined comment on
speculation the deal is aimed at blocking BHP's proposal.
Should Chinalco's move derail BHP's bid, the impact on the
Chinese metal industry would be positive, said Frederic Gits,
senior director at Fitch Ratings. The possible merger of two of its
most important raw material suppliers could be seen as a threat in
an industry dominated by so few players, he said.
Chinalco's deal, announced late on Friday, helped lifted its
listed unit Chalco and other Chinese steel makers, such as
Baosteel, by their 10 percent daily cap in Shanghai trading
yesterday.
"However, from Chalco's viewpoint, the picture is less clear, as
it would benefit from the improved access to raw materials. But the
increased financial burden on its parent Chinalco might also result
in some strain on its capital structure," Gits said.
BHP's bid has also been opposed by mills across Asia and Europe
on fears that a buyout would create a powerful cartel controlling
iron ore prices.
However, BHP Chief Executive Officer Marius Kloppers insists
that a combination would lead to higher efficiency and lower costs.
Led by Shanghai-based Baosteel, China is the world's largest buyer
of iron ore, with contract prices soaring over the past few
years.
(Shanghai Daily February 5, 2008)
