Rio Tinto $RIO (-0.48%)
$RIO (+1.48%) is currently exploring a possible share swap with Chinalco that would reduce the Chinese investor's 11% stake, allowing Rio to resume buybacks and pursue new strategic deals, three people familiar with the matter told Reuters.
State-owned mining giant Aluminum Corporation of China Limited (Chinalco) would swap part of its stake for partnerships in some of Rio's mining assets, ending governance restrictions that have limited the Anglo-Australian company's flexibility for more than 15 years, the sources said.
The swap could allow Rio to allocate capital and pursue mergers and acquisitions more decisively, in line with a general trend in the industry as global mining companies use consolidations and new projects to attract investors focused on long-term supply prospects.
》RIO ASSETS THAT MAY BE OF INTEREST TO CHINALCO《
As Western governments strive to catch up with China's dominance in critical minerals supply chains, Beijing's push to expand in copper is being increasingly scrutinized.
For this reason, Rio assets that could be of interest to the Chinese state-owned company are the Simandou iron ore project in Guinea, which is already 75% Chinese-owned and was the target of a failed takeover attempt by Chinalco in 2016, and the Oyu Tolgoi copper mine in Mongolia, a fourth source said.
Another possible swap could include Rio's titanium business, which is currently undergoing a strategic review as part of a comprehensive restructuring by new CEO Simon Trott, according to another source.
China, the world's largest producer and consumer of titanium dioxide, which is used in paints, cosmetics and military equipment, has expanded its production over the past decade and now dominates more than half of the global market.
