Rio Tinto mulls multibillion infusion from Chinalco; $6 billion issue

29 January 2009

The world's third largest diversified mining company, Rio Tinto, which is considering a range of options to reduce its massive debt by $10 billion from $39 billion in the current year, is seeking a multibillion dollar capital injection from Chinese aluminium maker Chinalco, assets sale to sovereign wealth funds and Chinalco and if both fail, then a $6-billion equity issue.

After having said late last year that it would not go the equity sale route to lighten its debt with chief executive Tom Albanese reiterating two weeks back that the company was not considering one as it was not needed under current economic conditions, the London-based miner yesterday backtracked saying that an equity issue was one among the many options under consideration.

The stock exchange had requested Rio Tinto to respond to market rumours of a likely equity raising, which Rio admitted was an option.

"In order to preserve maximum flexibility for the group, the boards do not rule out the potential to issue equity as one of the options it has available, if it is determined to be in the best interest of shareholders," the miner said in a statement.

The statement further said that "No decision on which options will be pursued has yet been taken, and further announcements will be made as and when appropriate."

Some important shareholders in Rio have threatened to remove the entire management team, if the miner goes in for an equity issue.