Chinalco limited to 15% Rio Tinto stake

The Australian government has approved a maximum holding of 14.99% in the shares of Rio Tinto PLC(RTP-N, RIO-L) for Aluminum Corp. of China (Chinalco). The approval is subject to the conditions that Chinese state-owned Chinalco does not appoint a director to Rio Tinto’s board, and that it will seek government approval prior to raising its stake above this level.

Rio Tinto is made up of Londonlisted Rio Tinto PLC and Melbourne- based Rio TintoLtd. In February, Chinalco and Alcoa (AA-N) announced the purchase of a 12% interest in Rio Tinto PLC for US$13 billion. The move appears to have two objectives: giving the Chinese government a significant ownership stake in the mining giant, while at the same time lessening the likelihood of a merger of iron ore miners BHP Billiton (BHP-N, BLT-L) and Rio Tinto — which would give them stronger pricing power over iron-importing China. BHP has made a hostile bid for Rio Tinto, which is being reviewed by various regulators from Europe to Australia to ensure that it will not harm competition in the iron ore market.

A 14.99% interest in London’s Rio Tinto PLC would give Chinalco an 11% interest in the combined Australian-British Rio Tinto group. Based on Chinalco’s 12% stake in Rio, it can acquire just under another 3% in Rio Tinto PLC.

Nick Cobban, media relations adviser for Rio Tinto, says that Rio noted the Australia’s government’s decision but declined to comment on it, or the possibility that Chinalco could increase its ownership interest. Chinalco expressed no interest in being anything more than a shareholder when it bought into Rio Tinto earlier this year, Cobban says, and the company has stuck to that limited role.