Chinalco to make further investment in Rio

Chinese aluminium company, Chinalco, is reported to be on the verge of increasing its stake in Rio Tinto.

Rio is struggling to reduce debt of around $40 billion and is in the throes of selling assets and a major cost reduction programme that involves 14,000 job losses worldwide.

Over the weekend, both The Times and The Telegraph have reported that a deal with Chinalco is on the cards, although the extent of the potential investment is unclear.

According to The Telegraph it could be up to $15 billion and if negotiations fail, Rio will go ahead with a $9 billion rights issue instead.

Chinalco already holds a 12% stake in Rio, having acquired the stock in February of last year when the state-owned company announced it was accelerating plans for global expansion.

At the time of the investment Rio was strenuously resisting BHP Billiton’s only to be abandoned hostile takeover bid.

In related news, Rio announced the $1.6 billion sale of assets in Brazil, Argentina and Paraguay last week.

The deal with Vale, a Brazilian miner, was regarded as raising a satisfactory sum for Rio and therefore bodes well for future disposals.