Alcoa hasn't outlined strategy for Rio Tinto

0 Comments | Deseret News (Salt Lake City), Feb 25, 2008 | by Dale Crofts Bloomberg News

Rio Tinto Group Chief Executive Officer Tom Albanese has said he doesn't know why Alcoa Inc. invested $1.2 billion in a venture to buy 9 percent of Rio after the two companies failed to hold talks on the deal.

Aluminum Corp. of China and Alcoa bought a $14 billion stake in Rio on Feb. 1 through Shining Prospect Pte., a Singapore-based investment vehicle owned by Chinalco. While Rio had a "cordial" meeting with Chinalco President Xiao Yaqing on Feb. 1, Albanese said he has yet to speak to Alcoa Chief Executive Officer Alain Belda about his intentions.

"We've not spoken with Alcoa, so I don't know where they sit or their views," Albanese, 50, said Friday in an interview in Chicago. "Alcoa has a fairly small piece of the total transaction, so it's difficult for me to judge the relevance of that piece."

Alcoa contributed $1.2 billion to the venture and has an agreement to raise its stake in the vehicle to as much as 25 percent, the London-based Times said Feb. 6, citing a regulatory filing. During the Feb. 1 meeting with Chinalco, Xiao said that he wouldn't seek to influence management or appoint anyone to Rio's board, Albanese said Friday.

"He sees a lot of value in Rio Tinto and sees it as a strategic investment," Albanese said of the discussions with Xiao. "He likes the assets and the way the assets are being run. He's not seeking to influence management or a board seat."

Rio, parent of Kennecott Utah Copper, rejected a sweetened $147 billion takeover offer from BHP Billiton Ltd., the world's largest mining company, on Feb. 6, saying the proposal "significantly" undervalues the company.

Analysts have suggested Chinalco bought the Rio stake to block a transaction that would create a company that supplies a third of the world's traded iron ore and is the biggest maker of aluminum and energy coal.

Alcoa spokesman Kevin Lowery didn't immediately return a voice mail message seeking comment.

"The opportunity did not present itself," to speak with Alcoa, Albanese said, without providing more details.

A combination of BHP and Rio would be the world's largest mining industry takeover and would cut operating costs in Western Australia. The entity would vie with Brazil's Cia Vale do Rio Doce as the world's largest supplier of iron ore. Chinese steelmakers are concerned that the combined company would control too much of the iron-ore market. China needs raw materials to feed an economy that grew 11.4 percent in 2007, the fastest pace in 13 years.

BHP Chief Executive Officer Marius Kloppers raised the bid for Rio Tinto by 13 percent five days after Chinalco bought the Rio stake.

Chinalco and Alcoa Inc. paid 6,000 pence a share for 9 percent of Rio on Feb. 1. That equated to 4.1 BHP shares for every one of Rio's London shares. BHP has offered 3.4 shares for Rio.