Rio proposes $15.2bn rights issue

Rio Tinto has announced that it is embarking on a $15.2 billion rights issue.

The group is abandoning plans announced in February for Chinalco to increase its stake in the business.

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

The state-owned nonferrous minerals giant is reported to be very disappointed at the move, which follows a recovery in global commodity prices.

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

The group will now have to pay Chinalco $195 million in compensation.

However, Rio has also agreed a cost saving joint venture with BHP Billiton, the mining giant that finally gave up on its hostile takeover bid for the group in November.

The companies are proposing to combine their major iron ore operations in Western Australia and achieve substantial savings as a result.

Under the terms of the deal, BHP will also be paying Rio $5.8 billion.