Chinalco, Rio Tinto: No Deal after all

The Australian authorities had given them the go-ahead. Chinalco was about to invest 19.5 bn US Dollars in the Rio Tinto Mining Group.

But it was a controversial issue in Australia – opponents to the deal argued that Chinalco, a state-owned Chinese company, was nothing but an agent for the Chinese government itself.

Yet it wasn’t the controversy which made Rio Tinto change it minds. It was the economy.

The deal with Chinalco was originally announced in February, when commodity prices were low. They have since recovered strongly, making the terms of the deal less attractive.
“Since we announced the Chinalco transaction, financial markets have seen a significant improvement,” said Rio chairman Jan du Plessis.
This meant the terms of the deal had “become markedly less valuable” and Rio’s ability to raise capital had “improved very considerably”, he added.

BBC News, June 5, 2009

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