RIO Tinto is considering an asset-for-equity arrangement with Chinalco that would reduce the Chinese investor’s 11% holding, enabling the miner to restart share buybacks and pursue strategic transactions, said Reuters citing sources.
State-owned Aluminium Corporation of China would exchange part of its stake for partnerships in Rio mining assets, ending governance restrictions that have limited the Anglo-Australian company’s flexibility for more than 15 years, the newswire said.
Assets likely to interest Chinalco include the Simandou iron ore project in Guinea, which is already 75% Chinese-owned, and the Oyu Tolgoi copper mine in Mongolia, a fourth source said. Rio’s titanium operations, currently under strategic review, could also feature in any exchange, another person added.
The swap would trim Chinalco’s stake by up to three percentage points, allowing Rio to execute buybacks and major acquisitions without diluting its largest shareholder, a source said.
Chinalco acquired nearly 15% of Rio Tinto Plc in 2008 under conditions imposed by Canberra, including no stake increase without approval. A subsequent $19.5bn investment proposal in 2009 was blocked by shareholders and regulators over concerns about Chinese control of strategic assets.
Activist investors are now urging Rio to abandon its dual Anglo-Australian listing structure, arguing it creates governance conflicts and complicates mergers with companies in jurisdictions restricting Chinese strategic holdings.
The discussions come as new CEO Simon Trott drives cost reductions across the group. An update on his reorganisation could arrive within two weeks, ahead of Rio’s investor day on December 4, two sources said.
Trott is streamlining operations to three core business units from four and considering further divestments, including potentially pausing work at the Jadar lithium project in Serbia.
