Word: tinto
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...that's going to have a chilling effect on foreign investment," says a senior Hong Kong investment banker. It will also hurt China's own economic interests abroad. The Australian government is reviewing the proposed $19.5 billion investment from Chinalco - China's huge state-owned aluminum company - in Rio Tinto, the world's second largest mining company, as well as a couple of other, smaller deals in the mining sector. But opposition in Australia has been increasing. There are TV ads now running that in effect say, "China will not allow us to buy one of their mines...
...China's leadership knows it will need much more of in the long run. In the past month, Chinese companies have bought assets abroad at an unprecedented pace. Aluminum Corp. of China (Chinalco), a major holding company focused on resources, has announced plans to invest $19.5 billion in Rio Tinto, one of the world's largest mining companies. If completed the deal would be the biggest foreign purchase any Chinese company has ever made. China Minmetals, another state-owned firm, said it would pay $1.7 billion in cash for Australia-based Oz Minerals, the world's second largest zinc miner...
...deals are not without controversy, particularly in Australia, where some are worried that control of vital resources is being handed over to the Chinese. Chinalco is a huge consumer of iron ore, and mining companies fear that the investment in Rio Tinto could give China more influence over the price of iron in global commodities markets. Every year, steel and aluminum producers worldwide dicker with the big raw-material producers over new contracts. During the boom years, when Chinese companies' appetite for virtually every metal was voracious, they got stuck with stiff price increases. But the deal could give Chinalco...
...Considering how far mineral prices have fallen, some analysts believe Chinalco might actually be paying a premium for Rio Tinto assets. But BOC International's Xu says "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." As long as commodity prices are depressed, Chinese companies - having learned the pitfalls of "Going Out" - are likely to be ravenous buyers...
...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...