Debt-laden miner Rio Tinto
Rio declined to comment on the article by commentator Michael West on the Sydney Morning Herald's Web site (www.smh.com.au), which gave no source for the information.
What we've said since we launched the deal is we are actively engaging shareholders and we are looking into their views and explaining the rationale behind the Chinalco deal, and that position hasn't changed, London spokeswoman Christina Mills said.
Chinalco, China's top aluminum maker, agreed this month to pay $12.3 billion for stakes in Rio's key iron ore, copper and aluminum assets and $7.2 billion for convertible notes that could potentially double its equity stake in Rio to 18 percent.
The deal sparked protests by Rio Tinto's top shareholders in Britain who said the company should have done a rights offering to all shareholders so that their stakes in the company would not be diluted.
In response to the backlash from its powerful institutional shareholders over the proposal, Rio is understood to be working on a deal which would deliver them a slice of the Chinalco action: that is, an offer of bonds on the same or similar terms, the article on Monday said.
Rio Tinto's shares recovered in London after sliding in Australia, gaining 1.2 percent to 1,832 pence by 6:55 a.m. EST, but slightly underperforming a 1.8 percent rise in the UK mining index <.FTNMX1770>.
The Sydney stock ended down 6.8 percent, lagging rival BHP Billiton's
A spokesman for Chinalco in Australia said any fresh plans by Rio were ultimately its decision. We're certainly working on the basis that it's proceeding as agreed, said Jim Kelly at public relations firm FD Third Person.
When Rio announced the deal on February 12, Chief Executive Tom Albanese said the Chinalco agreement could not be tinkered with since it was a package deal, but he did not say whether any additions would be considered.
Australian regulators must approve the deal, after which shareholders will vote on the deal in May.
If it is turned down, Rio would likely be forced into a heavily-discounted rights issue and asset sales to raise enough cash to make payments on its $39 billion in debt.
Chairman Paul Skinner did not mention any alternatives in a Sunday newspaper interview and said he still expected to persuade shareholders to approve the deal.
Clearly, if it didn't materialize we would have to look at other options, but I would remind you that the board is unanimously supportive of this transaction and so would find itself in a strange place if it were not to get shareholder approval, he told Britain's Sunday Telegraph.
A portfolio manager at Fortis Investment Partners in Australia, which owns Rio shares, said he had not been approached by the company with a plan for a wider issue of notes, nor had it been discussed with Australian institutions who met Rio Tinto's chief financial officer in Sydney last week to talk about the deal.
However, he said a move to offer notes to angry shareholders would make sense.
It strikes me that if I were on Rio's board, I would be thinking along those lines, said Neil Boyd-Clark, portfolio manager at Fortis. All things being equal, they (shareholders) would probably welcome the opportunity, he said.
It was unclear, however, if shareholders would be willing to pay the same premium for shares as under the Chinalco deal.
The $7.2 billion in convertible notes are in two tranches, allowing Chinalco to convert the bonds into shares at an equivalent of $45 and $60 a share, a premium of 67 percent and 123 percent, respectively, to the current price of London shares.
(Reporting by Sonali Paul in Melbourne and Eric Onstad in London; editing by Simon Jessop)