Chinalco-Rio Tinto deal fuels political storm

18 March 2009

The $19.5-billion deal between China's Chinalco and global mining major Rio Tinto is running into trouble following opposition from political corners and from its fourth-largest shareholder, Australian Foundation Investment Co (AFIC).

Australia's Foreign Investment Review Board (FIRB) decided on Tuesday to extend the review by 90 days, considering the complexity of the issue.

This would delay the final decision on the deal by the Australian treasurer Wayne Swan, till June.

The deal between Chinalco, China's biggest aluminum company, and the debt-laden Rio Tinto (comprising two dual-listed companies - Rio Tinto Plc of UK and Rio Tinto Ltd of Australia), announced last month would double Chinalco's stake in Rio Tinto to 18 per cent from the present 9 per cent (See: Chinalco invests $19.5 billion in Rio Tinto to raise stake to 18 per cent)

However, the deal has been opposed by politicians, industry experts, arch rival BHP Billiton, apart from the shareholders (See: Chinalco-Rio Tinto deal may run into rough weather).

The political uproar over the Chinalco and other Chinese investments in Australian mines grew this week. The upper house senate is expected to endorse an inquiry into whether foreign investment and proposals from state-owned entities to invest in Australian companies are in Australia's national interest.