Former Aussie treasury head Stone weighs in against Chinalco deal, terms curbs “worthless“

27 May 2009

Former Treasury head John Stone has openly come out against the proposed Rio Tinto-Chinalco deal which he says is against the national interest. He has warned the government that any conditions imposed on the Chinese company would prove ''utterly worthless.''

Stone was one of the most powerful Treasury secretaries in recent times and his strong criticism will add to the political pressure on the Rudd government over the issue.

Stone said that the government's stern conditions on Chinalco would not amount to much as the Chinese company would patiently wait out for a few years and then ignore them. He said no Australian government would be inclined to push the matter with the Chinese a few years down the line.

The Australian government is to take a decision on the $25.1-billion deal shortly. The original proposal had called for the state-owned Chinalco to lift is shareholding in Rio to 18 per cent then acquire stakes in some of its key mining projects including Hamersley iron ore operations in the Pilbara.

Chinalco and Rio are in the meantime in talks to take the concerns into account. Chinalco is believed to be willing to be agreeable to capping its shareholding to 15 per cent and also to curbs on access to marketing and management arrangements.

Most industry observers were favourably disposed to the deal subject to the concerns being addressed. But according to industry sources the government and market forces may demand greater curbs that could eventually abort the deal.