Mining in sequence

4 June 2009 By Una Galani Follow @ugalani

After a sharp rise in the miner s share price, the terms of the $19bn cash injection from Chinalco clearly gave too much to the Chinese. Rio can now pursue a megarights issue. It should mine shareholders as much as possible, before turning to cashrich rival BHP Billiton.

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Rio Tinto is understood to have abandoned its original proposed $19.5bn deal with Chinalco in favour of a rightsissue and tieup with rival BHP Billiton.

Rio Tinto is pursuing a range of options, some of which are at an advanced stage, for maximising shareholder value and improving the Group's capital structure. A further announcement will be made in due course, the company said in a press release.

In February, Rio Tinto said it would sell assets and convertible bonds to Chinalco for $19.5bn in cash. The Chinese governmentowned aluminium company is the AngloAustralian miner's largest shareholder. The proceeds would have cut the miner's net debt from $39bn to less than $20bn.

On June 4, Rio's shares fell 8% on speculation that the miner will imminently drop the deal with Chinalco. Rio's shares had risen almost 42% in the four months since the original deal was agreed.

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