Rio Tinto's majority shareholders oppose Chinalco deal at UK AGM

16 April 2009

Rio Tinto's chief executive Tom Albanese faced a harrowing time defending the $19-5 billion Chinalco deal at the dual-listed company's annual general meeting in London yesterday as shareholders demanded why the company was applying a long-term strategic solution to a short-term financing problem.

Addressing about 300 British shareholders, Albanese defended the deal saying that it would insure Rio against an uncertain global economy while shareholders said that the asset and share sale was like selling the family silver to Chinalco.

Both Albanese and Rio Tinto chairman, Paul Skinner, faced a continuous barrage from angry shareholders, for rejecting the $147-billion BHP Billiton takeover bid to the resignation of chairman-elect Jim Leng who had disapproved the method of raising funds to meet the company's debt repayment and the Chinalco deal.

Angry British institutional shareholders, who comprise 80 per cent of the company's shareholder register, remained opposed to the Chinaclo deal and demanded why the board did not come out with a rights issue to solve the company's debt problem.

Rio Tinto, crippling under a massive $39.1 billion debt in the wake of its acquisition of Alcan, (See: Update: Alcan to merge with Rio Tinto under $38.1 billion deal) has to make debt repayments of $8.9 billion in October 2009 and an additional $10 billion the following year.

To repay this debt, Rio Tinto created a strategic partnership with China's state-owned Aluminium Corporation of China (Chinalco), under which the Chinese company would invest $19.5 billion for Rio Tinto's mining assets as well as double its stake from the present 9 per cent to 18 per cent.