Rio Tinto dumped plans for a landmark investment from China last Friday, opting instead to raise US$21B through a rights issue and a joint venture with one-time suitor BHP Billiton. Rio’s US$19.5B deal with Chinese metals group Chinalco was put together in February at the height of the financial crisis in a bid to halve Rio’s US$38B debt. Its collapse last Friday under shareholder pressure left China, the world’s biggest steel-making nation, vulnerable to just two suppliers, the Rio/BHP combination and Brazil’s Vale, controlling 70% of global iron ore trade. “This is a big slap in the face for China,” said Paul Bartholomew at Steel Business Briefing in Shanghai “Rio has effectively been talking to BHP behind Chinalco’s back and Chinalco is entitled to feel like a two-timed lover this morning,” he said. Rio is to pay Chinalco a US$195MM break-up fee.
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