Mining Giant Scraps China Deal
SHANGHAI — The Chinese government’s largest investment ever in a Western company, a proposed $19.5 billion stake in the Australian-British mining giant Rio Tinto Group, collapsed early Friday, dealing a blow both to China’s global corporate ambitions and to its efforts to gain clout in the natural resources market.
The board of Rio Tinto announced the decision after meeting in London on Thursday, saying the company had ended the deal it struck in February to sell the stake to China’s state-owned Aluminum Corporation of China, also known as Chinalco.
The board said in a statement early Friday that it had ended the deal with Chinalco and would raise about $20 billion by issuing new stock and forming a joint venture with its longtime rival, the Australian mining giant BHP Billiton, the world’s largest mining company.
The China deal, which would have effectively expanded Chinalco’s existing 9.3 percent stake in Rio to 18.5 percent, had drawn stiff political opposition in Australia, where mineral riches have fueled the country’s prosperity and where some have begun to fear China’s power in the region. Institutional investors have also expressed skepticism about the agreement, with some calling it a sweetheart deal for the Beijing government.
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