RIO TINTO'S new chairman used his first meeting with shareholders yesterday to re-affirm the mining giant's commitment to the controversial $19.5bn (£13.4bn) tie-up with China's Chinalco.
Jan du Plessis, who formally took over from outgoing chairman Paul Skinner at the annual general meeting in Sydney, dismissed talk of a Plan 'B' should the proposal not go ahead. "We continue to be committed to Chinalco," he said.
The Chinese deal – which commits Chinalco to buying $7.2bn (£4.9bn) in convertible bonds and investing $12.3bn – was put together to help Rio manage the $40bn debt pile incurred from its top-of-the-market purchase of Allan, the US aluminium group, in 2007.
But shareholders have proved wary of the deal. Once fully matured, the bonds will take Chinalco's stake from 9.3 per cent to 18 per cent, leading to accusations that the board is riding roughshod over existing investors' pre-emption rights. Investments giving the Chinese group slices of between 15 and 50 per cent of a range of Rio's assets, including the Hamersley iron ore mine, have also raised concerns.
Rio's management says the deal will pay off the $8.9bn debt due this year, and the $10bn due in 2010, as well as allowing assets that would otherwise have been mothballed to remain in production. It will also help future expansion plans, particularly in China, the company says. Shareholders will vote on the proposal in July.
On his departure from Rio, Mr Skinner had been tipped to take over from BP chairman Sir Peter Sutherland. But the arrangement – which was never confirmed by either side – fell through. Insiders claimed that BP shareholders saw Rio's debt situation as a black mark against Mr Skinner.Reuse content