Word: chinalco
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Dates: during 2009-2009
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...China's shopping spree has gone far beyond oil. The Australian government is examining a bid by the Aluminum Corp. of China or Chinalco to buy an 18% stake of the heavily indebted minerals giant Rio Tinto, for about $19.5 billion. It is also considering a bid by the Beijing trading company Minmetals to buy Australia's mining company Oz Minerals for about $1.7 billion - enough to wipe out that company's debt. Meanwhile, Chinese president Hu Jintao made a five-country swing around Africa in early February, signing deals in Tanzania and Madagascar on agriculture and telecommunications, and promising...
...Chinalco, a huge consumer of iron ore, the deal provides potential pricing power over Rio, one of the world's three largest ore producers. Every year, steel and aluminum producers worldwide negotiate with miners over new contracts. For the past few years the mining companies have driven up prices relentlessly. Shan Shanghua, executive secretary of China's Iron and Steel Association, recently hinted that Chinese buyers will have some additional clout at the bargaining table...
...Metals analysts in London say rival giant BHP Billiton, which dropped a takeover bid for Rio last year as metals prices collapsed, is now poking around to see if other Rio assets may be for sale. In effect, the Chinalco deal has placed a value on some of the company's most attractive mines, including a Chilean copper mine that BHP already owns a piece...
...Some analysts believe Chinalco paid a premium for the Rio assets, given how much prices have slumped. But BOC International's Xu notes, "that the price is much, much lower for the assets - particularly iron ore and copper - than it would have been just six months ago. This seems like a pretty good deal for Chinalco...
...Because both Chinalco and Minmetals are state-owned companies, the deals face significant regulatory scrutiny in Australia, but are likely to go through with few major problems. Kevin Rudd, the prime minister, is a fluent Mandarin speaker who had made it clear that solid ties to Beijing are among his top priorities. And with the mining industry now flat on its back as the global recession deepens, it's unlikely Canberra will go out of its way to insult the only people around who have some money left in their pockets - and the willingness to spend...