Australia approves Chinalco investment in Rio Tinto PLC

The Government of Australia has approved Aluminium Corp of China’s acquisition of a minority stake in Rio Tinto.

The state-owned Chinese company, which is better known as Chinalco, has permission to buy 14.99% of the shares in Rio Tinto PLC, a division of the Rio Tinto Group.

Chinalco has already amassed a stake in Rio and if the company takes full advantage of the limit it will own around 11% of the entire group.

However any further investment inroads would need new government approval and Chinalco has also been barred from appointing a director to Rio Tinto’s board.

Analysts believe that Chinalco could be protecting its steel industry by investing in Rio because the latter is the subject of a £68 billion hostile takeover bid by BHP Billiton.

The takeover saga has been running for months but should BHP be successful, a merger of the two companies would combine the world’s second and third largest iron ore producers.

Rio continues to defend itself against BHP, having always maintained that the bid undervalues the company.

Rio is currently busy divesting itself of non-core business and is expected to post record profits of $5.1 billion in the current financial year.