The Aluminum Corporation of China (Chinalco), a leading Chinese diversified resources company and the holding company of Aluminum Corporation Of China Limited (Chalco), has signed an agreement to invest $19.5 billion in Rio Tinto. The transaction is subject to the approval of Rio Tinto shareholders as well as related regulatory countries, such as China, Australia, Canada and the United States, according to Chinalco.
According to the agreement, the investment will include about $7.2 billion for the procurement of convertible bonds issued by Rio Tinto in a net interest rate of 9 percent, which would, if converted, allow Chinalco to increase its existing shareholding to 19 percent in Rio Tinto plc and 14.9 percent in Rio Tinto Limited, or an equivalent of 18 percent interest in the Rio Tinto Group. Chinalco will be entitled to nominate two new non-executive board members to the Rio Tinto Group.
Chinalco will invest an additional $12.3 billion to acquire a part of Rio Tinto's shares in related aluminum, copper and iron ore assets through the creation of joint ventures:
· Hamersley Iron Ore plc: 15 percent
· Weipa Bauxites: 30 percent
· Yarwun Alumina Factory: 50 percent
· Boyne Electrolytic Aluminum Factory in Australia: 49 percent of Rio Tinto's 59 percent share
· Escondida Copper Mine in Chile: 49.75 percent of Rio Tinto's 30 percent shares
· Kennecott Copper Mine in the U.S.: 25 percent
· Grasberg Copper Mine in Indonesia: 30 percent of Rio Tinto's 40 percent share
· LaGranja Copper Mine in Peru: 30 percent
The two companies will establish three strategic cooperation committees and establish three joint venture sales companies in the proportion of 50:50 to responsible for the sale of iron ore, cooper and aluminum products from the joint venture projects.
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