Canberra: Failed Chinaalco deal not to affect trade ties

10:06, March 15, 2010      

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Australia Monday welcomed a report by Beijing clearing Rio Tinto and the Australian government of blame for the collapse of a $19.5 billion tie-up between Chinalco and Rio Tinto last June, the Reuters reported Monday.

An Australian newspaper, The Age, said that a detailed report to the State Council, or China's cabinet, blames economic forces and a powerful public relations campaign by BHP Billiton for the failure of what would have been China's biggest offshore investment.

"Objectively speaking, the failure of the merger between Chinalco and Rio Tinto lies in the rapid recovery of the world resources market, including the related stock market, which was beyond everyone's expectations," The Age quoted a Chinese report as saying on Monday.

Australian Trade Minister said the report should help heal Sino-Australian relations, soured over the failed bid, and that Australia continued to welcome foreign investment to help expand its iron ore production, according to the Reuter report.

"That's an important concession if it's true and we welcome that, and hope that not only was it a learning process but it provides the basis for moving forward with our relationship with China on a more solid footing," Crean told reporters.

Chinalco had agreed on a $19.5 billion equity and asset tie-up to help rescue Rio Tinto from its debt woes in February 2009, which the Anglo Australian miner abruptly called off in June opting instead to raise money through a rights offer and form an iron ore joint venture with BHP.

The Chinese government's report says the deal failed because Chinalco did not do enough to "engage other Rio shareholders or to fight the public relations war in Australia", the newspaper said.

The report concludes that China underestimated the backlash to the deal and the effectiveness of a campaign led by Rio's rival BHP against the China's largest aluminum company owning key resources in Australia.

It also outlines several mistakes China made which led to it losing the public relations war in Australia, including launching two other resources bids at the same time, Chinalco not lobbying enough, and not communicating well with Rio Tinto's key shareholders.

People's Daily Online

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