Friday June 5, 06:56 AM
Chinalco 'disappointed' as Rio Tinto cancel deal
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BEIJING (AFP) - State-owned Chinese aluminium producer Chinalco said it was "very disappointed" after mining giant Rio Tinto (LSE: RIO.L - news) cancelled a 19.5-billion-dollar tie-up.
"We are very disappointed at this outcome," Chinalco president Xiong Weiping said in a statement on the company website.
"We had maintained an extremely flexible and constructive attitude in our consultations with Rio Tinto."
Anglo-Australian Rio Tinto said earlier it had cancelled the Chinalco deal and would instead launch a 15.2 billion dollar rights issue.
Chinalco's investment in Rio Tinto, announced on February 12, would have been China's largest ever investment in a foreign company.
"We continue to believe the February 12 agreement presented an outstanding value-creating opportunity for all Rio Tinto shareholders," said Xiong.
"It would have provided a strong platform for a long-term strategic partnership between the two companies."
The statement noted that Rio had announced a plan to establish a joint venture with BHP Billiton (LSE: BLT.L - news) in the Pilbara region of Western Australia.
"As the largest single shareholder in Rio Tinto, Chinalco will monitor closely the rights issue and the plans for the joint venture with BHP Billiton in Pilbara of Western Australia," Xiong said.
Explaining the decision to cancel the deal, Rio chairman Jan du Plessis said commodities prices had recovered since Chinalco made its bid, making that deal less attractive.
Cui Jingyi, a Shanghai-based analyst with Guotai Jun'an Securities, said: "Rio Tinto was in a difficult situation when the deal was signed and so the terms were relatively easy.
"Now the situation has changed and Rio must have found the deal wasn't worth it any more," she said.
She added that the cancellation underlined problems China has in global business dealings.
"I think our ability to control resources and overseas markets and manage international negotiations is quite weak and we lack experience," she said.
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