Rio Tinto Bows to Investors

Sky — Sat, 06 Jun 2009 19:47:07 +0000

The mining group—Rio Tinto, has scrapped a controversial $19.5 million deal with China and is preparing a rights issue that could raise as much as $15 billion.
In a dramatic twist to Rio’s attempts to cut its $39 billion debt burden, the miner bowed to shareholders pressure and waled away from its deal with China’s state-owned metal group—Chinalco. Rio is expected to announced a rights issue, which will raise between $10 billion and $15 billion.
As rumour of the deal’s collapse spread through the London stock market, Rio’s share price fell £1.92 to £27.2. The company issued a statement, saying that it was pursuin a range of options, some of which were at an advance stage. The Anglo-Australian miner is also thought to be in talks with BHP Billiton about asset sales and a possible joint iron ore venture.
Investors were unhappy that the miner had struck a deal to raise money from Chinalco without offering shareholders an opportunity to participate in a rights issue. Rio’s decision to drop the Chinalco deal is likely to cost the company $195 million in a break fee. It also threatens relations with China, the company’s largest customer.
The failure of the Chinalco ceal might force the chief executive—Tom Albanese to step down as some big investors have lost faith in his management.

BGN Entrepreneur » mining group

Rio Tinto Bows to Investors