Rio expects green light for deal

Melbourne - Anglo-Australian mining giant Rio Tinto is confident the Australian government will approve its $19.5bn tie-up with Chinese state-owned aluminium-maker Chinalco, Rio's strategy chief said on Sunday.

In a controversial deal announced last week, Chinalco will spend $12.3bn on stakes in nine of Rio's mining assets and also buy $7.2bn of convertible Rio debt which could end up doubling the Chinese firm's stake in Rio to 18%.

There is speculation Australia might block the deal, fearing Beijing would have too much influence over a major export earner, but Rio strategy managing director Doug Ritchie said the deal was structured to meet Canberra's foreign-ownership concerns.

"And we are most confident that the way in which this has been done will more than satisfy the Australian FIRB requirements," he said on Sky Business television, referring to the government's Foreign Investment Review Board.

In Australia, the deal is subject to approval by the board, Treasurer Wayne Swan and Rio Tinto shareholders.

"We're very confident that this deal will get up," he said, adding that the company would bust "the myth of being subsumed by some Chinese dragon" by persuading all shareholders that there were safeguards in place to protect their interests.

Rio needs the deal to go ahead for it to help reduce the $39bn in debt it took on in 2007 to buy Canadian aluminium company Alcan when commodities prices hit their peak. The group has nearly $19bn in debt due in the next 20 months.

Treasurer Swan has said he will scrutinise the deal with Chinalco. Just as the deal was announced, he said he was seeking to amend foreign-investment rules to count convertible bonds as equity.

- Reuters