Rio Tinto is reportedly exploring an asset-for-equity swap with Aluminium Corporation of China Limited (Chinalco) that could reduce the Chinese investor’s 11% stake in the company. The proposed deal could free up Rio to resume share buybacks and pursue strategic mergers and acquisitions. Sources familiar with the matter told Reuters that Chinalco would exchange part of its stake for partnerships in some of Rio’s mining assets. Rio Tinto is a leading global mining group that focuses on finding, mining, and processing the Earth’s mineral resources. Chinalco is a large, state-owned mining enterprise in China.
The potential swap aims to resolve governance constraints that have limited the Anglo-Australian company’s flexibility for more than 15 years. Assets of interest to Chinalco could include the Simandou iron ore project in Guinea and the Oyu Tolgoi copper mine in Mongolia. Another possibility involves Rio’s titanium business, which is currently under strategic review as part of a broader restructuring plan led by Rio’s new chief executive, Simon Trott. Chinalco acquired a near 15% stake in Rio Tinto Plc in 2008, subject to conditions imposed by Canberra, including restrictions on increasing its stake without approval and not having a board seat.
The discussions come as Trott implements tighter cost controls across the Rio Tinto group. Shortly after assuming his role on August 25, Trott announced plans to streamline the company’s structure to three core business units, down from four, to concentrate on profitable assets. Further updates on the reorganisation are expected in the coming weeks, ahead of Rio’s investor day scheduled for December 4. In addition to reviewing Rio’s borates, iron, and titanium businesses, Trott is considering further divestments, including pausing early work at the Jadar lithium project in Serbia.
The proposed swap could cut Chinalco’s stake by up to 2 to 3 percentage points, allowing Rio to execute buybacks, pursue large M&A deals, and restructure its capital without diluting its largest shareholder. Rio Tinto declined to comment on the matter, and Chinalco did not respond to a request for comment.