China offers Rio Tinto $20-billion loan if Chinalco deal is passed

14 March 2009

China's hunger for minerals is scaling new heights in 2009; to get the Chinalco deal passed by a hesitant Australian government and angry shareholders, the Exim Bank of China has offered debt-riden Rio Tinto loans potentially worth $20-billion to develop future mining projects in Australia, China and else where in the world.

However, the loan is contingent on the state-owned China Aluminium-Rio Tinto deal being passed by the Australian regulators (See: Rio Tinto shareholders continue to oppose Chinalco deal).

The $20 billion would be made available to Rio Tinto as soft loans to develop mining projects in Australia, China and other parts of the world, which it would not be able to do under the current tight credit market.

Last month, Beijing made its biggest investment ever in a foreign company, when state-owned Aluminium Corporation of China (Chinalco) offered to invest $19.5 billion into troubled mining giant Rio Tinto, where the Chinese company's holding in Rio would increase from an existing 9 per cent to 18 per cent. (See: Chinalco invests $19.5 billion in Rio Tinto to raise stake to 18 per cent)

But the deal has run into a storm with the Australian government, shareholders of Rio and arch rival BHP Billiton both seething in anger with BHP pulling out all stops to scuttle the deal in Canberra.

Just minutes before Rio Tinto announced the deal, the Australian government amended the foreign acquisitions and takeovers act of 1975, making convertible debt to be treated as equity with the change coming into effect immediately.