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Rio, Chinalco promote tie-up to Australian government
Sydney (AFP) May 2, 2009 Anglo-Australian mining giant Rio Tinto and its Chinese state-owned suitor, Chinalco, have promoted their 19.5 billion US dollar tie-up to the Australian government as beneficial for both nations. Canberra is reviewing the deal, which would see Chinalco double its stake in Rio to 18 percent, taking two seats on the Rio board and stakes in its aluminium, bauxite, copper and iron ore projects. Beijing's largest-ever foreign investment, the proposal has come under intense fire in Australia, amid increasing sensitivity about China's quest to secure a firmer hold on natural resources around the globe. The issue prompted Australia's parliament to call a special inquiry into foreign investment by state-owned entities, to which Rio and Chinalco have both made written submissions. Rio acknowledged fears that state-owned investment could lead to loss of national identity or culture, reduced competitiveness or national security, but said such concerns were "frequently over-estimated". "All have been effectively addressed by Australia's foreign investment review regime over a long period," Rio said in its submission earlier this week. "Indeed, it is arguable that Australia's ability to attract large quantities of foreign investment while mitigating any perceived downsides has been the foundation for the country's prosperity." Rio said its tie-up with Chinalco "represents the optimum combination of new capital, raised at premium prices, with ongoing benefits through a pioneering strategic partnership." "The proposed transaction provides an example of the type of foreign investment that is consistent with Australia's national interest," Rio said. The capital injection would "immediately" strengthen Australia's economy and the broader Sino-Australian relationship, Rio said. "The proposed transaction will not allow Chinalco to exercise control over Rio Tinto's assets," it added. "Even if control (of Rio's assets) was assumed, Chinalco could not manipulate the price of bauxite, alumina or iron ore to the detriment of other Australian producers or the advantage of Chinese customers." Chinalco said open trade and investment flows were in the interests of both Australia and Beijing. "Chinese law ensures that a separation exists between the ownership interests in a state-owned enterprise and its assets and the management of the commercial operations of the enterprise," Chinalco said. The Foreign Investments Review Board is due to rule on the proposal next month. It recently gave the green light to Minmetals for a 850 US million dollar takeover of debt-laden OZ Minerals, while Hunan Valin Iron & Steel Group was allowed to increase its stake in iron ore miner Fortescue Metals Group to up to 17.55 percent, by investing more than one billion dollars. Share This Article With Planet Earth
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