Chinalco decided to participate in the $15.2-billion rights issue of global miner Rio Tinto with the financial support from the Agricultural Bank of China and China Development Bank, Caijing Magazine reported on Tuesday.
Aluminum Corporation of China (Chinalco), the state-owned enterprise has made up its mind to buy new shares this week offered by Rio Tinto with the financial support from the Agricultural Bank of China (ABC) and China Development Bank (CDB), a source close to ABC told Caijing Magazine.
Though the source declined to release the detailed information of the line of credit and distribution, the move of funding indicates Chinalco is determined to maintain its shareholding ratio in the company.
At present, Chinalco is the single largest shareholder of Rio Tinto, controlling 9.3% of its total shares. If Chinalco had decided not to subscribe to the rights issue, its ownership of Rio Tinto would have been diluted.
Rio Tinto launched the world's fifth largest rights issue after turning down Chinalco's $19.5-billion transaction on June 5. The right issue aims to raise approximately $11.8 billion for Rio Tinto plc and $3.4 billion for Rio Tinto Ltd. It is aimed at cutting a large amount of debt.
Chinalco completed the registration process for the rights issue before the June 15 deadline but the company said then that it had not made up its mind on whether to participate in the issue or not.
According to the prospectus released by Rio Tinto on June 16, the right issue consists of 21 new Rio Tinto plc shares offered for every 40 existing shares at 1,400 pence ($9.68) per share and 21 new Rio Tinto Ltd shares offered for every 40 existing shares at AU$28.29 ($22.94) per share.
Rio Tinto said the subscription prices represent discounts of about 38.2% and 47.2% to the theoretical ex-rights prices (TERPs) of 2,265.6 pence and AU$53.61 per new Rio Tinto plc share and Rio Tinto Ltd share, respectively.
According to a report by Sunday Telegraph, Chinalco is now considering a large-scale investment in Anglo American Plc, a diversified mining and natural resources group. The newspaper said Anglo American Plc is now preparing for negotiations with the Chinese company.
Officials from its press department declined to comment on the twin subjects.
Chinalco needs to invest at least 1.4 billion to maintain its shareholding ratio in Rio Tinto.