Chinalco will gain extensive powers to influence the investment policy and strategic direction of Rio Tinto's core iron ore, copper and aluminium businesses, according to special side agreements relating to last month's deal in which the state-backed Chinese aluminium group agreed to buy a strategic stake in Rio.
Behind the headlines of the February deal in which Chinalco agreed to spend $19 billion (£13 billion) in return for 18 per cent of Rio and invest in its iron, copper and aluminium assets, there are complex subsidiary agreements.
These give Chinalco representation on boards and committees that will steer huge joint ventures that house a direct Chinese investment in Rio's mining operations.
Concern is mounting in Australia over the political price Rio may have paid for Chinalco's $19 billion investment. Australia's Foreign Investment Review Board initiated a 90-day review of the investment this week.
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A leading shareholder in Rio, Australian Foundation Investment Company, has expressed disquiet over potential conflicts of interest in a state-backed Chinese metals company involved in the running of Rio's mines.
More fuel was added to the flames on Wednesday when the Chinese competition authority barred Coca-Cola's agreed takeover of a Chinese soft drinks company, Huiyuan Juice.
The extent of Chinalco's ambition to take part in the strategic direction of mining operations is apparent in a schedule to the February 12 contract, setting out a mechanism to create a strategic alliance vehicle (SAV) under which Chinalco will own 15 per cent of Hamersley Iron, a Rio Tinto subsidiary.
Chinalco will nominate two directors to the five-man board of Iron Ore SAV. The Chinese group will also have two out of six directors on the Iron Ore Strategic Alliance Committee, which approves investment programmes and budgets.
The Chinese company has equal representation on the copper and aluminium strategic alliance committees, although the Rio-nominated chairman has a casting vote. The SAVs will create sales marketing companies, controlled equally by Chinalco and Rio.
According to a Rio spokesman, Chinalco will have votes on the strategic alliance committees only according to its proportionate ownership interest, which is below a controlling interest.
Source: Times Online
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