Alcoa, Chalco buy Rio Tinto stake

Alcoa Inc. and Aluminum Corp. of China jointly acquired 12 percent of the shares of global mining company Rio Tinto PLC in a deal believed to be worth $14.05 billion, the companies said Friday.

It is the largest overseas investment ever by a Chinese company, Aluminum Corp. of China said, and could very well obstruct a bid from Anglo-Australian mining giant BHP Billiton for Rio Tinto.

Alcoa said it contributed $1.2 billion (810 million euros) to the total investment.

Aluminum Corp. of China, the country's biggest maker of both aluminum and alumina, said it made its purchase through a Singapore-based wholly owned unit called Shining Prospect Pte.

The two companies said in a regulatory filing that they did not "currently intend to make an offer for Rio Tinto PLC," though they reserved the right to announce an offer or participate in an offer within the next six months.

"Our acquisition of a significant strategic stake in Rio Tinto PLC today reflects our confidence in the long-term prospects for the rapidly evolving global mining sector," Xiao Yaqing, president of Aluminum Corp. of China, said in a statement.

London-based Rio Tinto became the world's biggest producer of aluminum and bauxite with its $39.7 billion purchase last year of Montreal, Canada-based Alcan.

On Friday, Rio Tinto Chairman Paul Skinner said, "This unsolicited development, of which we had no prior notice, reinforces our view of the long-term value of Rio Tinto. In line with our long-standing strategy, we shall continue to focus on operating our many world-class assets to maximize value and prospects for all shareholders."

State-owned Aluminum Corp. of China owns a 38.56 percent stake in listed unit Chalco, whose shares are traded in New York, Hong Kong and Shanghai.

Chalco's shares rose 11.9 percent in Hong Kong on Friday. They fell 2.5 percent in Shanghai, where the market closed before the deal was announced.

Aluminum Corp. of China said its share of the $14.05 billion purchase was partially funded by the China Development Bank, a Beijing-based bank set up mainly to finance government projects.

The purchase followed widespread rumors that a Chinese entity might try to block BHP Billiton's unsolicited takeover bid for Rio Tinto. However, most of that speculation had centered on China's steel industry, which has a huge stake in the world iron ore trade.

Xiao said the purchase of the stake in Rio Tinto demonstrated its belief in the company's fundamental value.

It also underlines his company's "determination to increase and diversify its exposure to the sector and to be well-positioned within this changing industry landscape," he said.

Like many major Chinese industry groups, Chalco has been rapidly expanding internationally, acquiring resource assets in Australia, Canada, Peru, Fiji and Guinea.

Pittsburgh-based Alcoa, the world's third-largest aluminum maker, also has been expanding, in fast-growth markets such as Brazil, China and Russia.

"We have long believed that Rio Tinto has a world-class portfolio of assets and is very well positioned to prosper in the current mining cycle," Alain Belda, Alcoa's chairman and CEO said in a statement.

Belda described the partnership with Chalco as one that would "allow us to mutually benefit from developments in the sector."

Rio Tinto has rejected BHP Billiton's offer for buy Rio Tinto for about $130 billion in a share swap. Britain's takeover regulator has given BHP Billiton until Feb. 6 to either formalize its proposal to buy Rio Tinto or say it is not interested.

BHP Billiton's spokeswoman, Samantha Evans, said the company had no comment.

Alcoa last year sold its nearly 7 percent stake in Chalco for $2 billion, a stake acquired for only $200 million when the Chinese company made its initial public offering in 2001.