Debt-laden global miner Rio Tinto yesterday scrapped its proposed $US19.5 billion ($NZ31.17 billion) deal with Chinese firm Chinalco and instead launched a heavily discounted $US15.2 billion rights issue.
Earlier in the day, it announced a 50-50 joint venture with rival BHP Billiton, which attempted a hostile takeover of Rio late last year, in a non-binding agreement for a production joint venture covering all of both companies' Western Australian iron ore assets in the Pilbara, with Rio getting almost $A6 billion from BHP.
The failed $US19 billion Chinese deal was set to underpin payment of about $US10 million of Rio's $US38.9 billion debt, largely from its purchase of Alcan two years ago.
To equalise the joint venture contribution, BHP will pay Rio $US5.8 billion for equity-type interests, boosting its stake in the joint venture from 45% to 50%.
Rio, the world's second-largest iron ore producer, killed off the Chinese deal, which would have been China's biggest single offshore investment, immediately after it announced the joint venture agreement with BHP.
The Rio rights-issue shares would be issued in Australia at $A28.29 each and in London at 14, on the basis of 21 new shares for every 40 shares currently held.
A trading halt was placed on Rio shares yesterday and they last traded in Australia at $A66.90 and in London at 27.53. The Pilbara joint venture will operate as a cost centre and deliver iron ore, in equal volumes, to ships designated by BHP and Rio to sell independently through their own marketing groups.
