BEIJING, Mar. 5 -- Aluminum Corp. of China, the largest shareholder in Rio Tinto Group, is seeking membership of the board of the world's third-biggest mining company, reversing a stance it took when it first bought a stake two years ago.
"We are actively seeking" board membership, Chairman Xiong Weiping, said today in an interview in Beijing, without giving a timetable or saying how many seats may be sought by Aluminum Corp., or Chinalco. Rio spokesman Tony Shaffer wasn't immediately able to comment when contacted in Melbourne.
Chinalco, the nation's largest producer of aluminum, is seeking a seat after Rio Tinto last June rejected an additional $19.5 billion investment from the Chinese company in favor of an accord with rival BHP Billiton Ltd. Relations between Rio and China have been strained since four of the London-based company's employees were arrested last year in Shanghai.
"It probably means they are not going to sell their shares, which is a good thing because that would place undue pressure on Rio's stock and create uncertainty about the value of the shares," said Tim Schroeders, who helps manage $1.1 billion, including Rio stock, at Pengana Capital Ltd. in Melbourne.
Rio's shares rose 0.8 percent to A$75.01 at the 4:10 p.m. Sydney time close on the Australian stock exchange.
The company was planning to offer Chinalco two board seats had the $19.5 billion investment last year proceeded. The Chinese company and Alcoa Inc. initially bought a 9 percent stake in Rio in 2008 for 7.2 billion pounds ($10.8 billion). At that time, Rio's Chief Executive Officer Tom Albanese told investors Chinalco wasn't seeking a board seat. Chinalco bought Alcoa's stake in February 2009.
The Rio employees, including Australian Stern Hu, are facing charges of obtaining trade secrets and bribery in the country. Rio, the world's second-largest producer of iron ore, plans to build its relationship with China, Chief Financial Officer Guy Elliott told Sky News on Feb. 14. China is London- based Rio's single largest market, accounting for almost a quarter of sales.
"Given the stake they've got, if they want a board seat, then that's fine, provided the right conditions are put in place that the business isn't compromised through conflict of interest," Pengana's Schroeders said.
Chinalco denied in January a Reuters report that China Investment Corp. may want to buy its stake in Rio. "We are not in discussions with CIC concerning any stake sale of Rio Tinto," Vice President Lu Youqing had said.
Rio's nomination committee is chaired by the company's chairman Jan du Plessis. The committee reviews the mix, structure and experience of the board along with potential candidates, according to Rio's Web site. Proposals for new board members are submitted to the board ahead of shareholder approval at the company's annual general meeting.
Rio will hold its meeting for its London-listed shareholders on April 15 and for Sydney-listed shareholders on April 22.
Measures by the Chinese government to tighten lending "will have some impact on companies," Chinalco's Xiong also said today while attending the National People's Congress.
The Chinese economy expanded 10.7 percent in the last quarter of 2009, the fastest pace since 2007, helped by record lending. The government has ordered some banks to pare loans, raised the ratio banks must set aside as reserves and guided bill yields higher in an attempt to avert an asset bubble from building.
Rio Tinto named Ian Bauert as managing director for China on Feb. 5. Bauert, a fluent Mandarin speaker who has worked with Rio for more than 30 years, will be based in Shanghai, according to the company.
Bauert should "very much contribute" to the company's building of bridges with China, Elliott said last month.