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The Australian government approved on Sunday the application of Aluminum Corp. of China Ltd. to acquire up to 11% of the shares of global mining giant Rio Tinto, but set two strict restrictions.
Australian Treasurer Wayne Swan stated that one of the two conditions is that if China Aluminum wants to further increase its shareholding ratio, it must obtain approval from the Australian government; The second condition is that as long as China Aluminum's shareholding ratio is less than 15%, the company shall not seek to appoint directors to Rio Tinto PLC in the UK or Rio Tinto Ltd. in Australia.
Before approving China Aluminum's stake in Rio Tinto, the Australian government decided to conduct a detailed review of foreign investment. Swann stated in early July that the government would increase its scrutiny of major overseas customers seeking control of the Australian commodity manufacturer.
Aluminum Corporation of China unexpectedly acquired a portion of Rio Tinto's equity in February, which is one of the largest overseas investment projects for Chinese companies.
At that time, Aluminum Corporation of China acquired a 9% stake in Rio Tinto for $14.1 billion. As this proportion is less than 15%, there is no need to apply for approval from the Foreign Investment Review Board of Australia to acquire this portion of equity, but China Aluminum voluntarily submitted the application.
Swan stated in a statement that it is acceptable to approve China Aluminum's equity application in order to protect national interests from harm.
China Aluminum Corporation is seeking to acquire 14.99% of the shares of Rio Tinto, listed on the London Stock Exchange, which is equivalent to 11% of the entire Rio Tinto Group, including Australia's Rio Tinto.
A spokesperson for Rio Tinto stated that Swan's statement reflects the normal approval process of the Foreign Investment Review Committee.
Prior to the announcement of the above decision, last Friday, the competition regulator in Australia, which monitors the pricing power of the iron ore market, expressed concerns about BHP Billiton Ltd.'s acquisition of Rio Tinto.
