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Rio Tinto raises more than $18-billion from s -

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Rio Tinto raises more than $18-billion from share sale

Sue Lannin reported this story on Friday, July 3, 2009 12:46:00

PETER CAVE: Rio Tinto has raised more than $18-billion from a sale of new shares to investors in
one of the world's biggest capital raisings.

The sale went ahead after the big miner ditched a deal with Beijing backed Chinalco Mining.

The fund raising means that Rio may not be forced to sell assets to pay off its $US40-billion debt,
following its takeover of the Canadian aluminium producer, Alcan.

Its rival, BHP Billiton has sold a nickel refinery to Australia's fifth richest person.

Here is our finance reporter, Sue Lannin.

SUE LANNIN: It's been a deeply discounted share sale but one which has satisfied Rio Tinto

Many were opposed to Rio's planned tie up with the Chinese state owned company, Chinalco.

John Murray is the head of fund manager, Perennial Value Management.

JOHN MURRAY: We only ever saw the Chinalco deal as a short term fix. It would have worked against
the interests of the existing shareholders, including ourselves over the longer term. So looking at
the rights issue, the way it has occurred, we have ticked off now the balance sheets concerns in
terms of the company being overladen with debt. That is now no longer an issue in our eyes and we
can now look forward to the company going forward and growing over the longer term and in a
financially much stronger position.

SUE LANNIN: Rio sold 97 per cent of the new shares on sale in London and nearly 95 per cent of the
new shares in Australia.

They went for the discounted price of $28.29 almost half yesterday's closing price on the local
share market.

John Murray says there are no regrets.

JOHN MURRAY: We certainly participated to the full extent in the rights issue. Very happy to do so
at the discount that it applied at and I think it is good news for existing investors and good for
the company that are now financially in a much stronger position.

SUE LANNIN: And it seems that Rio is no longer a dishonourable woman in Beijing's eyes.

Rebuffed suitor Chinalco has taken up its full entitlement to the rights offer.

Yesterday the company said the decision was economically rational because otherwise its nine per
cent stake would have been diluted.

John Murray says he's not worried about Chinalco's intentions.

JOHN MURRAY: This is just a commercial transaction which they have entered into. It is pleasing
that they have taken up their rights. I mean from where I sit as a fellow shareholder, it is
reassuring that they still see a positive outlook for Rio. That is good news.

SUE LANNIN: The next hurdle is Rio's planned merger of iron ore operations in Western Australia
with BHP Billiton.

The deal has been opposed by major customers like China and Japan.

The merger plans and the capital raising now means Rio won't be forced to sell off assets to pay
off debt.

Mark Taylor is senior resources analyst at Morning Star.

MARK TAYLOR: Probably won't have to because this cash and the cash that is going to be coming in
from BHP if the Western Australian iron ore joint venture is approved should pretty much cover
enough of their debt.

Having said that, I still think they will be looking to sell assets because some of the assets
including the paper and packaging business that came with Alcan are non-core and not really
businesses they want to be in so they will be more than glad to sell them if the right price is in
the offing.

SUE LANNIN: Rival BHP Billiton is also offloading assets.

It's sold its Yabulu nickel refinery north of Townsville to mining billionaire Clive Palmer, the
country's fifth richest person for an undisclosed amount.

Mr Palmer says he paid many millions of dollars for a good business opportunity after seven months
of negotiations.

CLIVE PALMER: We may have to restructure it and provide for future opportunities and our aim would
be to see if we can eventually expand the plant up there, so we hope there will be good
opportunities for everyone in the future.

SUE LANNIN: The decision has also been welcomed by the Queensland Treasurer Andrew Fraser, who's
being sued by Mr Palmer for defamation.

ANDREW FRASER: It would have been devastating to Townsville and the regional economy for the nearly
1,000 jobs on site to be lost up there. What this is about is a good result here. That means that
the refinery will continue.

SUE LANNIN: BHP Billiton will take a more than $600-million hit on the value of the refinery and
around $220-million in lost tax benefits.

The Ravensthorpe nickel mine in Western Australia which closed in January is still on the market
but Mr Palmer says he isn't negotiating for Ravensthorpe.

PETER CAVE: Our finance reporter Sue Lannin reporting there.