Rio shareholder attacks Chinalco deal as watchdog extends probe

Mining company's senior executives accept pay freeze

The Debt-ridden miner Rio Tinto's attempt to agree a controversial $19.5bn funding plan was dealt an Australian doubly-whammy yesterday when a regulator and a shareholder voiced concerns about too much control being handed over to China as part of the deal.

The Foreign Investment Review Board (FIRB), an Australian regulator, extended its review of the Chinese aluminium maker Chinalco's investment in the Anglo-Australian miner. The initial 30-day review period ended at the weekend, and the FIRB wants up to 90 more days. This could hold up a vote by Rio's shareholders, originally slated for May.

That vote may also prove difficult for Rio after one of its major Australian shareholders went public yesterday with its concerns about the deal. "Significant influence has been given to Chinalco with no premium paid," the Australian Foundation Investment Co (AFIC) said. "We are deeply concerned about Chinalco becoming involved with the running of the business."

The fund added that Chinalco faced a clear conflict of interest because the Chinese company is both a customer and a competitor of Rio. It is also state-owned, giving it huge financial clout.

Under the proposed deal, Chinalco would pay $12.3bn for stakes in Rio's key iron ore, copper and aluminium assets and $7.3bn for convertible notes that could in time double its stake in Rio to 18 per cent.

This would be China's biggest single offshore investment and has sparked both shareholder and political concerns.

It emerged separately yesterday that Rio's senior executives have now agreed to a base salary pay freeze this year after investor dissatisfaction about recent strategic decisions.

The company is now widely thought to have overpaid to buy rival Alcan in 2007, a deal that left it saddled with a $40bn debt headache. Rio then rebutted a takeover bid by rival BHP and its shares have since slumped.

Falling commodity prices have meanwhile undermined Rio's attempts to sell non-core assets to tackle debt and forced it to seek alternative means of raising cash. About a quarter of the borrowings are repayable this year.

While Rio continues to argue that the Chinalco deal gives it access to cheaper financing than alternatives, analysts remain sceptical. "While the deal with Chinalco could solve Rio Tinto's debt repayment problems over the next two years, we believe that it would do so at too high a cost," said Evolution's Charles Kernot and Charles Cooper. "Against this backdrop, we recommend shareholders vote against the Chinalco transaction and then subscribe $10bn in a rights issue."

Sources close to the matter said Rio is open to tweaking the terms of the deal, which has also taken flak from London-based shareholders. The most likely change would be to give existing investors access to the convertibles on offer to Chinalco.

A spokesman for Rio said: "The management of Rio Tinto is actively engaged in meetings with shareholders to listen to their views."

Voices
On the last day of campaigning before the polling booths open, the SNP leader has written to voters in a final attempt to convince them to vote for independence
voicesIs a huge gamble on oil keeping the First Minister up at night?
Sport
A 'Sir Alex Feguson' tattoo
football

Arts and Entertainment
Liam Neeson said he wouldn't
tv

Liam Neeson's Downton dreams

Voices
voicesApple continually kill off smaller app developers, and that's no good for anyone
PROMOTED VIDEO
Arts and Entertainment
Ben Whishaw is replacing Colin Firth as the voice of Paddington Bear
tv

Thriller is set in the secret world of British espionage

Life and Style
life

News
ScienceGallery: Otherwise known as 'the best damn photos of space you'll see till 2015'
Travel
travelWhy Japan's love hotels are thriving through an economic downturn
Life and Style
fashion

Bomber jacket worn by Mary Berry sells out within an hour

Life and Style
Alexander McQueen A/W 2014
fashionPolitics aside, tartan is on-trend again this season
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Rapper Jay Z performs on the Pyramid Stage at Glastonbury in 2008
musicSinger sued over use of the single-syllable sample in 'Run This Town'
Sport
Joel jumps over the board...and into a giant hole
footballFrom joy to despair in a matter of seconds
News
i100
Arts and Entertainment
Pointless host Alexander Armstrong will voice Danger Mouse on CBBC
tv

Much-loved cartoon character returns - without Sir David Jason

Arts and Entertainment
Meera Syal was a member of the team that created Goodness Gracious Me
tv

Actress to appear in second series of the hugely popular crime drama

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

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Audit Manager Central Functions

To £85,000 + banking benefits: Saxton Leigh: You will be expected to carry out...

Credit Risk Audit Manager

Up to £90,000 + benefits: Saxton Leigh: Credit Risk Audit Manager required to ...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week