Chinalco Gets Australia’s Limited Nod For Rio Tinto Stake

Australia is walking a fine line over Chinese investment in its natural resources. It has approved Chinalco’s recent purchase of a minority stake in Anglo-Australian miner Rio Tinto, but said any further share purchases will require prior approval. Nor can Chinalco have a seat on Rio’s board, Wayne Swan, Australia’s Federal Treasurer, ruled on Sunday.

State-owned Chinalco, along with the U.S.’s Alcoa, has been buying what they say is a target 14.9% stake in Rio, the subject of a $164 billion takeover bid from BHP Billiton. The pair said in February that they had paid $14.1 billion for a 12% stake in Rio’s London-listed shares, or 9% of the total group. As a consumer of iron ore in particular, China doesn’t like the prospect of so much supply being concentrated by the merger of the world’s no 2 and no 3 products.

Approval of the share purchases to date was expected, despite some muttings that Australia was leaning towards backing off its open-to-foreign-investment stance. The Australian government does seems to have used the ruling to set a ceiling on what it it considers an acceptable level of Chinese investment, and that may mean Chinalco won’t end up with a large enough shareholding to have a material affect on the outcome of the Rio-BHP  bid.

The other point in all this is that while China is still an important market for Australian natural resources, taking 20% of Australia’s output, Australia is getting relatively less important as a supplier as China’s needs continue to grow and China’s companies turn to mines in Africa and South America. Rio and BHP operate on those continents, too. The Australian government may be walking the wrong line.

5 Comments

Filed under Economy

5 responses to “Chinalco Gets Australia’s Limited Nod For Rio Tinto Stake

  1. pug_ster

    There’s always some kind of controversy when China invest in foreign country’s companies or debt. However it is not when it is the other way around.

  2. Pingback: BHP Billiton Drops Rio Tinto Bid Cheering Steelmakers « China Bystander

  3. Pingback: BHP Billiton Drops Rio Tinto Bid, Cheering Steelmakers « Market Bystander

  4. Pingback: Recent Links Tagged With "rio" - JabberTags

  5. Pingback: Chinalco’s $20 Billion Stake In Rio Tinto Is No Done Deal « China Bystander

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s