Rio Tinto Ltd sold virtually all of the UK part of its $15.2 billion rights offer, the world's fifth-biggest, easing its huge debt burden and putting the world's top iron ore miner back in growth mode.
Strong take-up of the heavily discounted rights offer suggests investors have restored faith in Rio after recent distractions that included a hostile takeover approach and soured ties with China, its biggest shareholder.
But analysts said the mining giant still needs to sell non-core assets to pay down the $38 billion debt it took on to buy Canadian aluminum maker Alcan in 2007.
It's more like getting back to business, said Mark Daniels, equities director at Aberdeen Asset Management, who oversees A$1.2 billion ($960 million) including Rio stock. Aberdeen's Australian fund fully subscribed to the offer.
It's now about getting the most out of their assets, he said, noting Rio's relatively high exposure to aluminum was a drag. If somebody would like to buy those assets, and offer a reasonable price, then they'd be happy to divest, he said.
The Alcan buy pushed up aluminum's contribution to Rio's underlying profit to about 12 percent, double that of rival BHP Billiton Ltd.
Australian packaging group Amcor Ltd is in talks with Rio to buy part of Alcan's packaging business, which could bring in $1.5 billion, Deutsche Bank estimates.
Rio said shareholders stumped up for 97 percent of its London shares on offer. The UK tranche will have raised around $11.7 billion, more than a fifth of the market value of the UK-listed company. Results of the Australian offer were not yet available, but a banking source said take-up was likely to be similar.
They still have a fair bit of debt they need to work through. So I think they will be still be keen to be pursuing non-core asset sales, said Ross Barker, managing director of Australian Foundation Investment Co, which manages about A$3.5 billion including Rio shares.
Barker said the strong bidding also reflected the attractive offer price, and confirms our view that shareholders were wanting to participate in Rio's recapitalization to get through with the issues that it had with the Alcan purchase.
Barker's fund was among those Rio shareholders who agitated earlier this year against a planned $19.5 billion tie-up with China's state-owned Chinalco.
Chinalco, Rio's top shareholder, took up its full entitlement in a sign it is far from severing ties with Rio.
Relations between Rio and the Chinese group soured last month after the miner called off a bigger equity partnership and opted instead for the rights issue and an iron ore joint venture with BHP, prompting China's state media to brand Rio as a dishonorable woman.
Chinalco owns about 9 percent of the combined dual-listed Rio Tinto group and would have spent $1.5 billion to take up all its rights.
I'd see this as more of a financial investment (by Chinalco) than a strategic investment, said Barry He, analyst at Morgan Stanley in Hong Kong. They don't have operational linkages so far.
In terms of the benefits they could get for the investment, Chinalco could potentially buy raw materials from Rio, since they produce aluminum. But we haven't seen this happening yet.
Rio's gearing is expected to drop to about 37 percent after the rights offer from 61 percent, analysts estimate. Rio's market value has slumped 64 percent in little over a year, partly due to the debt-funded Alcan buy.
People still view Rio as having very good assets, and don't want to be diluted. But you'd want the board to be considering what it was that led up to the Alcan purchase and try and improve the processes so that sort of thing doesn't happen again, Barker said.
Rio's Australian shares rose 0.9 percent on Thursday, outpacing a 0.4 percent rise on the S&P/ASX 200 index.
Rio offered 21 new shares for every 40 held, priced at a steeply discounted A$28.29 per Australian-listed share and 14 pounds per London-listed share. The London shares closed on Wednesday at 21.55 pounds.
(Additional reporting by Sui-lee Wee in HONG KONG)
(Editing by Ian Geoghegan)
($1=A$1.25) ($1=.6091 Sterling)