The Aluminum Corp of China (Chinalco, 中國鋁業), one of the world’s biggest aluminum producers, agreed to invest US$19.5 billion yesterday in global miner Rio Tinto Group in the country’s biggest overseas investment so far.
As part of the deal, Chinalco and debt-laden Rio Tinto said the Chinese company agreed to invest US$12.3 billion in joint ventures in aluminum, copper and iron ore mining.
“This strategic partnership represents a key step in Chinalco’s development into one of the world’s leading natural resources companies,” Chinalco president Xiao Ya-qing (肖亞慶) said in a statement.
Chinalco’s investment is a tremendous boost for London-based Rio Tinto, which is aiming to pay back about US$10 billion of its US$38 billion debt mountain by the end of this year by axing some 14,000 jobs worldwide, selling assets and cutting capital spending.
Last November, rival miner BHP Billiton canceled its US$68 billion bid to take over Rio Tinto, citing the latter’s debt as a major risk.
The agreement will give the Rio Tinto greater access to China’s market, where demand for raw materials has soared in recent years, chairman Paul Skinner said.
“We have long recognized and welcomed the growing participation of China in the global economy,” Skinner said. “We believe this transaction is a logical step in advancing our capability in the Chinese market.”
The issue of US$7.2 billion of convertible bonds to Chinalco could almost double, to 18 percent, Chinalco’s existing 9.3 percent stake in Rio Tinto Group. That investment resulted from the purchase last year, with Alcoa Inc, of a 12 percent stake a year ago in Rio Tinto PLC, the company’s London-listed unit.
The deal, coming at a time when China’s economy is being squeezed by the global economic crunch, reflects Beijing’s determination to line up future resources for key industries.
“Our objectives are to seek commodity and geographic diversification, with a view to achieving long-term financial returns from our investments,” Xiao said.
Rio Tinto also announced yesterday that its net profit plunged 50 percent to US$3.7 billion, largely due to impairments that mainly were writedowns related to the group’s aluminum business.
Earlier this week, Rio Tinto’s chairman-elect Jim Leng quit less than a month after being named to the board of the debt-laden mining giant, reportedly due to disagreements over the deal with Chinalco. Rio Tinto has not provided an explanation for Leng’s sudden departure.
Skinner remains Rio Tinto’s chairman for now.
He cast the deal as a “clear of vote of confidence” in the company’s prospects and the outlook for commodities.
“The deal meets the two sides’ interests. Chinalco has plenty of cash, while Rio Tinto needs the capital injection to get through tough times,” said Li Huazheng, an analyst at Shanghai Securities, in Shanghai.
“At the same time, Chinalco can get access to resources that it has dreamed of having for a long time,” Li said.
Rio Tinto’s shares were suspended yesterday pending the announcement.
Chinalco is not immune to crashing commodities markets and slumping demand: it recently reported that its net profit for last year probably fell 50 percent from a year earlier, to less than 5 billion yuan (US$732 million).
But like many big state companies it has a massive cash reserve thanks to recent boom years and its 2007 share offering in Shanghai.
A statement by Rio Tinto said the deal entitles Chinalco to nominate two non-executive board members to join the company’s 15 member board.
The government is aiming to recruit 1,096 foreign English teachers and teaching assistants this year, the Ministry of Education said yesterday. The foreign teachers would work closely with elementary and junior-high instructors to create and teach courses, ministry official Tsai Yi-ching (蔡宜靜) said. Together, they would create an immersive language environment, helping to motivate students while enhancing the skills of local teachers, she said. The ministry has since 2021 been recruiting foreign teachers through the Taiwan Foreign English Teacher Program, which offers placement, salary, housing and other benefits to eligible foreign teachers. Two centers serving northern and southern Taiwan assist in recruiting and training
WIDE NET: Health officials said they are considering all possibilities, such as bongkrekic acid, while the city mayor said they have not ruled out the possibility of a malicious act of poisoning Two people who dined at a restaurant in Taipei’s Far Eastern Department Store Xinyi A13 last week have died, while four are in intensive care, the Taipei Department of Health said yesterday. All of the outlets of Malaysian vegetarian restaurant franchise Polam Kopitiam have been ordered to close pending an investigation after 11 people became ill due to suspected food poisoning, city officials told a news conference in Taipei. The first fatality, a 39-year-old man who ate at the restaurant on Friday last week, died of kidney failure two days later at the city’s Mackay Memorial Hospital. A 66-year-old man who dined
‘CARRIER KILLERS’: The Tuo Chiang-class corvettes’ stealth capability means they have a radar cross-section as small as the size of a fishing boat, an analyst said President Tsai Ing-wen (蔡英文) yesterday presided over a ceremony at Yilan County’s Suao Harbor (蘇澳港), where the navy took delivery of two indigenous Tuo Chiang-class corvettes. The corvettes, An Chiang (安江) and Wan Chiang (萬江), along with the introduction of the coast guard’s third and fourth 4,000-tonne cutters earlier this month, are a testament to Taiwan’s shipbuilding capability and signify the nation’s resolve to defend democracy and freedom, Tsai said. The vessels are also the last two of six Tuo Chiang-class corvettes ordered from Lungteh Shipbuilding Co (龍德造船) by the navy, Tsai said. The first Tuo Chiang-class vessel delivered was Ta Chiang (塔江)
EYE ON STRAIT: The US spending bill ‘doubles security cooperation funding for Taiwan,’ while also seeking to counter the influence of China US President Joe Biden on Saturday signed into law a US$1.2 trillion spending package that includes US$300 million in foreign military financing to Taiwan, as well as funding for Taipei-Washington cooperative projects. The US Congress early on Saturday overwhelmingly passed the Further Consolidated Appropriations Act 2024 to avoid a partial shutdown and fund the government through September for a fiscal year that began six months ago. Under the package, the Defense Appropriations Act would provide a US$27 billion increase from the previous fiscal year to fund “critical national defense efforts, including countering the PRC [People’s Republic of China],” according to a summary