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Rio Tinto (ASX:RIO) is pondering an asset-for-equity swap with Chinalco that would see the Chinese investor’s 11% stake trimmed down and, most importantly, free up the Australian major to restart buybacks and explore new deals.
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Should the deal, first reported by Reuters on Wednesday, eventuate, Chinalco would hand over some of its holdings for several key Rio mining assets.
These, HotCopper understands, would likely be the massive Simandou iron ore project in Guinea, which China has been chasing full control over since as far back as 2016, and Mongolia’s Oyu Tolgoi copper mine.
Chinalco (full name Aluminium Corporation of China Ltd) tried to pry Simandou away from Rio nearly a decade ago, but couldn’t get the buyout over the line.
Rio’s titanium business could also be on the table, Reuters suggested in its report.
Either way, Rio is very eager to get the bumper deal through if at all possible.
For the major, the last fifteen years have been relatively hamstrung by governance constraints mostly revolving around Chinalco ownership.
The mooted swap would let Rio “allocate capital and pursue mergers and acquisitions more decisively” and would let it lean on consolidation and new projects to attract future investors for long-term supply.
Chinalco originally bought into Rio Tinto in 2008 under rules imposed by Canberra in the 2000s. Chinalco had then wanted to inject as much as $19.5 billion into the company a year later, but that was blocked by gov’t bodies.
All this pondering comes as Rio faces pressure from holders to also drop its Anglo-Australian dual-listing. Many believe it’s not worth the U.K.-cross-Australian red tape and claim Rio would be better served focusing on a singular listing as soon as possible. Rio has been dual-listed since 1995.
Today, RIO is trading at $128.87/sh. It’s down -1.17%.
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