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US approval of Rio Tinto-Chinalco deal seen as pressurising Australians

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By: Martin Creamer

15th May 2009

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JOHANNESBURG (miningweekly.com) – Australia appeared to be put under pressure to clear the stalled Rio Tinto-Chinalco transaction after the US gave the deal its thumbs up on Friday.

Rio Tinto and Chinalco confirmed that they had obtained clearance from the Committee on Foreign Investment in the US regarding the proposed issue of convertible bonds to Chinalco and the indirect minority investment in Kennecott Utah Copper Corporation of the US.

Rio Tinto and Chinalco jointly filed a voluntary notice with US body and the receipt of the committee’s clearance satisfies a regulatory precondition to the transaction.

Chinalco wants to invest $19,5-billion in Rio Tinto to obtain an 18% stake and take in the diversified miner out of its heavy-debt position, but the deal has evoked attacks from Australia’s opposition, with decision making prolonged.

The US, in 2005, stopped China’s National Offshore Oil Corporation from buying American oil company Unocal, with the US committee’s latest decision a small indication of a new attitude to Chinese investment in the US.

In 2007, China’s Investment Corporation invested $3-billion in New York private-equity firm Blackstone in return for a 10% stake just ahead of the meltdown, now seen as an opportunity for the Chinese to invest abroad as part of its "Going Out" strategy.

The US committee’s clearing the Rio Tinto-Chinalco transaction follows receipt of approvals from the Australian Competition and Consumer Commission and the German Federal Cartel Office, both in March.

Edited by: Creamer Media Reporter