Thursday, May 15, 2008

China, Rio Tinto and BHP

From The Australian:
BHP shares soar as China seeks ally

CHINESE interests have approached a major Australian superannuation and investment fund to be their partner in a multi-billion-dollar swoop on 9 per cent of BHP Billiton.

Shares of BHP Billiton rose more than 4 per cent to a record $50 after the stock market opened today. By early afternoon, BHP shares were up $1.68, or 3.5 per cent, to $49.66. The benchmark S&P/ASX 200 Index was 1.3 per cent higher.

Under the terms of the proposed deal, the Chinese would take 4.5 per cent of BHP Billiton while the other half would be split between the Australian fund and a global private equity investor....MORE

From International Political Economy Zone:
Rio Tinto and China: A Love-Hate Relationship

In addition to Chinalco's stake in Rio Tinto, the relationship between the Australian mining giant and China's steelmakers is definitely a many-sided one that mirrors Australia's mixed relationship with China. While Australia's current bout of prosperity owes a lot to China's emergence in the world economy, Oz is wary of becoming too dependent on the PRC for its fortunes. Indeed, Australia may not take too kindly to large-scale purchases of its firms by the Chinese like other developed countries fear.

Let us start with the sunnier of two articles on this relationship. First, Rio Tinto is seeing Chinese investment as a potential source of funding in its Simandou project in Guinea. Although the African mine is much closer to Europe, Chinese demand may become the deciding factor in the future for this project which is partially funded by the IFC. From the Financial Times:

Rio Tinto is seeking partnerships with Chinese steel and construction companies to help develop a $6bn (£3.08bn) West African iron ore mine, in what would be the mining group’s largest deal with China, its biggest customer....