Rio Tinto Announces Pioneering Strategic Partnership with Chinalco

Joint ventures and convertible bonds to deliver US$19.5 billion in cash to Rio Tinto

The Boards of Rio Tinto plc and Rio Tinto Limited announce today that they are unanimously recommending to shareholders a transaction with Aluminium Corporation of China ("Chinalco"), a leading Chinese diversified resources company. The transaction will forge a pioneering strategic partnership through the creation of joint ventures in aluminium, copper, and iron ore as well as the issue of convertible bonds to Chinalco, which would, if converted, allow Chinalco to increase its existing shareholding in Rio Tinto.

Transaction highlights

Delivers substantial aggregate cash proceeds of US$19.5 billion through:

- Investment by Chinalco in certain aluminium, copper and iron ore joint ventures totalling US$12.3 billion
- The issue of subordinated convertible bonds in two tranches with conversion prices of US$45 and US$60 in each of Rio Tinto plc and Rio Tinto Limited for a total consideration of US$7.2 billion. If converted, the subordinated convertible bonds would increase Chinalco's current shareholding to 19.0% in Rio Tinto plc and 14.9% in Rio Tinto Limited, equivalent to an 18.0% interest in the Rio Tinto Group Raises significant funds at a time when financial markets are distressed, materially reducing Rio Tinto's indebtedness, strengthening its balance sheet and increasing its flexibility to pursue attractive investment opportunities throughout the cycle 
Creates a pioneering strategic partnership with a leading Chinese diversified resources company:
- Rio Tinto will benefit from Chinalco's strong relationships within China, which Rio Tinto believes will continue to be the main driver of growth in commodity markets over the longer term
- The strategic partnership creates the opportunity for joint ventures and project development in emerging economies. The two groups bring complementary skills, including Chinalco's capabilities to deliver infrastructure projects and Rio Tinto's leadership in operational excellence and sustainable development
- Rio Tinto will enter into a landmark joint venture for exploration in China, in partnership with Chinalco
- The Chinalco relationship will facilitate access for Rio Tinto to funding for project development from Chinese financial institutions 

Chinalco will be entitled to nominate two new non-executive Board members (one independent under applicable corporate governance criteria) to add to the fifteen current Board members of Rio Tinto. Independent non-executive directors will continue to comprise a majority of the Rio Tinto Boards, consistent with corporate governance best practice 

Rio Tinto retains operational control of the joint venture assets, with clear governance arrangements and continued commercial marketing of joint venture product while maintaining its commitment to best practice and sustainable development 

The transaction is subject to approval by the shareholders of Rio Tinto, governments and other regulators

source: http://kaznak.web.infoseek.co.jp