Rio and BHP battle over world’s biggest copper mine

Rio Tinto, the embattled FTSE 100 mining giant, rebuffed a “low ball” offer from rival BHP Billiton for its stake in the world’s biggest copper mine last month.

Tension between the two Anglo-Australian listed mining companies intensified last week when Rio decided to take a $19.5bn (£13.6bn) injection from Chinalco, China’s state-owned metals group. This included $3.4bn for half of Rio’s 30 per cent stake in Escondida, the Chilean copper mine.

BHP, which last year abandoned an attempt to buy Rio that would have been the second-biggest corporate takeover in history, is trying to get its rival’s shareholders to veto the Chinalco investment plan in favour of a share issue. BHP would like to buy Rio’s stake in Escondida, in which it already owns 57.5 per cent.

However, mining sources said that BHP offered “less than half” $3.4bn for all of Rio’s 30 per cent stake in the middle of last month. “It was a low- ball offer,” said a close source.

With Chinalco paying $3.4bn for just 15 per cent, this means that the Chinese group valued the mine at more than four times BHP’s offer. Rio chief executive Tom Albanese said last week that Chinalco’s offers for key assets “were very attractive and certainly more attractive than” undisclosed rival bids.

Rio was close to choosing a rights issue over a Chinalco cash injection to tackle its huge debt burden. However, a senior mining banker said that Chinalco’s investment gave Rio greater protection from having to accept low bids from BHP for its assets.

Paul Skinner, the Rio chairman, believes that the company would have only raised $10bn from a rights issue.

Some major investors in Rio are concerned that Chinalco, which could end up with an 18 per cent stake from its current 9 per cent in the company, will have too much influence and could dilute existing shares if it takes up convertible bonds. Chinalco is raising $7.2bn in bonds that can be converted into an equity stake in Rio.

The Association of British Insurers has told Mr Skinner that a rights issue would have been preferable.

Last week Mr Skinner’s nominated successor, Jim Leng, left the company after arguing in favour of a rights issue. If the sale of a stake to Chinalco fails, it would cast doubt on plans for Mr Skinner to take over as chairman of BP.

Legal & General, Rio's third-biggest shareholder with more than 5 per cent of the company, has warned that it has "pre-emption rights". This means the right of first refusal of a deal it does not like as an existing shareholder. L&G met with the Rio board to outline its concerns on Friday.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
News
One Direction's Zayn Malik gazes at a bouquet of flowers in the 'Night Changes' music video
people
News
people
News
'Free the Nipple' film screening after party with We Are The XX, New York, America - 04 Feb 2014
news
Arts and Entertainment
Russell Tovey, Myanna Buring and Julian Rhind Tutt star in Banished
tvReview: The latest episode was a smidgen less depressing... but it’s hardly a bonza beach party
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18000 per annum: Recruitment Genius: A position has arisen within th...

Ashdown Group: Development Manager - Rickmansworth - £55k +15% bonus

£50000 - £63000 per annum + excellent benefits : Ashdown Group: IT Manager / D...

Recruitment Genius: Security Officer

£16500 per annum: Recruitment Genius: Applicants must hold a valid SIA Door Su...

Ashdown Group: Business Analyst - City, London

£50000 per annum: Ashdown Group: Business Analyst - Financial Services - The C...

Day In a Page

The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss
Tony Blair joins a strange and exclusive club of political leaders whose careers have been blighted by the Middle East

Blair has joined a strange and exclusive club

A new tomb has just gone up in the Middle East's graveyard of US and British political reputations, says Patrick Cockburn
Election 2015: Meet the top 12 wacky candidates seeking your vote in May

Election 2015

Meet the top 12 wacky candidates seeking your vote in May