Rio Scraps Deal to Sell to Aluminium Corporation of China
It's over. Rio Tinto has scrapped the deal to sell 18% of itself to the Aluminium Corporation of China (Chinalco) for $19.5 billion. The share went into a trading halt earlier today. It appears Rio has decided instead for a $10 billion rights issue to raise at least some of the capital it needs to pay off its $40 billion in debt. $8.9 billion of that debt comes due in October, by the way.
So what now? Well, the Chinalco bid came at the bottom of the market. Things are a bit better now. And shareholders seem eager to provide the needed capital rather than bringing on board a suitor whose intentions are at best, opaque.
It certainly takes Wayne Swan and the Foreign Investment Review Board off the hook. But the question of how Australia will manage future overtures from state-owned Chinese companies is still on the table, and will be for many years. China has capital and a large appetite for Aussie resources. That won't change any time soon.
But in the meantime, the market looks a little tired. The Dow managed to eke out a 77 point gain overnight. Aussie stocks, though, are in the red. The only real movers today are over in the commodity patch with oil and gold.
Dan Denning
for The Daily Reckoning Australia
P.S. to get The Daily Reckoning direct to your inbox sign up to our free e-mail newsletter or if you prefer to use RSS, subscribe to the Daily Reckoning RSS feed.
Related Articles:
- The Family Office
- Price of Water Rises in China
- RBA Leaves Rates Unchanged, Rio Wraps Up Negotiations
- China Reduces Holdings of Treasury Securities
- The Aussie Dollar as a Measure of Global Risk Appetite
About the Author
Dan Denning is the author of 2005's best-selling The Bull Hunter (John Wiley & Sons). Dan draws on his network of global contacts from his base in Melbourne. He’s the managing editor of resource newsletter Diggers and Drillers and the editor of The Daily Reckoning Australia.