Chinalco not keen on Yurwan funding; awaits FIRB ruling

02 June 2009

Chinese aluminium giant Chinalco has been refusing to commit funding the expansion to Rio Tinto's cash strapped Yarwun alumina refinery, which is now only 29 per cent complete.

As part of the Rio-Chinalco deal, Chinalco had agreed to pay $500 million for a 50-per cent stake in the Yarwun refinery and separately agreed to consider funding the expansion of Yarwun 2.

However, with the $19.5-billion alliance still under the scrutiny of Australian Foreign Investment Review Board (FIRB), Chinalco is showing little interest in the Yarwun project. (See: Chinalco invests $19.5 billion in Rio Tinto to raise stake to 18 per cent).

FIRB has set a deadline of 15 June to announce its decision on the mega deal. A favourable decision would see Chinalco pay $12.3 billion for stakes in Rio and invest another $7.2 billion in convertible bonds that could enhance its stake in Rio to 18 per cent.

Rio said in a statement yesterday that it push back the deadline for Chinalco to decide on whether to fund the alumina refinery's expansion from May 31 to June 15. This is the second time Rio has granted Chinalco an extension. The deadline was originally March 31.

"The extension has been requested by Chinalco to allow it to complete its project evaluation and approvals processes," Rio said.