Chinalco denies designs on Rio

Speculation that Aluminum Corp of China (Chinalco) may mount a rival bid for Rio Tino has subsided, following a statement from Chinalco’s president.

Last week the state owned miner acquired a $14 billion stake in Rio in a joint venture with Alcoa, but President Xiao Yaqing has made it clear that the purchase is a strategic investment and there are no plans to take over the group.

This week sees the expiry of the deadline set by the Takeover Panel for BHP Billiton to formalise its offer for Rio, the latter having already rejected an initial offer of three BHP shares for every Rio share.

Analysts are suggesting that Chinalco, which is one of China’s large state-owned companies, may have secured an interest in Rio in response to the current consolidation in the mining sector.

According to John Kemp of Sempra, “China has a strong interest in preserving a diversified and competitive mining industry.”

Adding: “Senior leaders are clearly worried about the industry’s rapid consolidation, and the risk it will tilt the balance of market power even further in the direction of a handful of mining majors.”

Rio’s acquisition of Alcan last November could mean that a merger with BHP would create a group controlling much of the world’s supply of alumina and this would be seen as a threat to aluminium makers, such as Chinalco and Alcoa.

In related news, the China Development Bank is rumoured to be interested in acquiring a 35% share in Xstrata, the Anglo-Swiss mining group and Chinalco is expected to make further investments in Australia’s mining sector.