On Thursday, June 11, China's Aluminum Corp. of China (Chinalco) president Xiong Weiping said that the collapse of the $19.5 billion deal to invest in Australia's largest iron ore producer Rio Tinto was totally out of Chinalco's control. Rio Tinto's announcement on June 5, regarding the collapse of the deal with Chinalco, came after press speculations which claimed that the deal was about to fall apart.
Speaking to the press at Chinalco's head office in China, Mr. Xiong said the Chinese company had offered amendments to February's original deal, including a smaller stake in Rio Tinto than the proposed 18 percent and a simplification of the marketing structure for iron ore. Chinalco had also said it would accept a cut in its proposed minority stake in Rio Tinto's Hamersley iron ore mine to 7.5 percent from 15 percent, Mr. Xiong added.
However, the issue of representation for Chinalco on Rio Tinto's board remained unresolved, and this was the main sticking point in the talks.
"We believe these are very significant concessions and amendments to the original transactions and they should be sufficient to meet the requirements of both the shareholders and the Australian regulators," Mr. Xiong commented.
"In the process of this transaction, Chinalco has also felt the open and welcoming attitude from the Australian government towards foreign investment, including from China," Mr. Xiong said.
On the same day the Chinalco deal was scrapped, Rio Tinto also confirmed its plans to tap shareholders for $15.2 billion and announced the signing of a non-binding agreement with Australia's second largest iron ore producer BHP Billiton to establish a production joint venture covering the entirety of both companies' Western Australian iron ore assets.
Declining to say if Chinalco wanted to take a stake in that joint venture, Mr. Xiong stated, "We have never received any proposals inviting us to take part in other deals, so we cannot talk about accepting or declining."
According to Mr. Xiong, Chinalco, still Rio's largest shareholder with a nine percent stake, has not yet decided whether to subscribe to Rio Tinto's planned rights issue, but was studying all the possibilities.