Chinalco pays US$19.5b for bonds and mines to boost Rio Tinto stake

State-owned Aluminum Corp of China (Chinalco) has agreed to invest US$19.5 billion in debt-laden Rio Tinto Group, gaining access to global mining resources in the mainland's largest overseas acquisition.

The Beijing-based parent of listed Aluminum Corp of China (Chalco) would buy US$7.2 billion of convertible bonds and pay US$12.34 billion for 15 to 50 per cent stakes in nine of Rio's copper, bauxite and iron ore mining assets in Australia, Chile, Indonesia, Peru and the United States, the Anglo-Australian mining giant said in a statement yesterday.

The bonds, with a 60-year maturity and a coupon rate of 9 to 9.5 per cent if converted, will lift Chinalco's stake in the world's third-biggest miner to 18 per cent from the 9 per cent it bought in February last year with US-based Alcoa for US$14 billion.

Alcoa said in a statement the Chinese firm also agreed to buy its interest in Rio for US$1.02 billion.

Chinalco will be entitled to nominate two new non-executive directors to the board of Rio, which yesterday reported a 50 per cent decline in full-year net income after taking a one-time charge for writing down the value of its aluminium assets.

'This strategic partnership represents a key step in Chinalco's development into one of the world's leading natural resources companies,' said Chinalco president Xiao Yaqing.

Mainland companies splashed out at least US$18 billion last year to buy mining assets globally, taking advantage of the financial crisis that slashed valuations.