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Rio Tinto’s uncertain future

Marius Kloppers,
Chief Executive,
Seoul, South Korea — MININGREVIEW.COM — 19 September 2008 – The Rio Tinto Group – the London and New York-listed international mining group headquartered in the United Kingdom, and the world’s third-largest mining company – will probably be broken up within two years by a group including Chinese investors.

The Group – currently battling a hostile US$115 billion (R860 billion) takeover bid from BHP Billiton Limited – “probably won’t all go to BHP,” Richard Davis who oversees US$30 billion (R225 billion) in global commodity equities at BlackRock’s London unit, told Bloomberg News in an interview here. “There probably will be some sort of consortium, which will break the company up and will obviously involve the Chinese.”

Bloomberg reports that shares of London-based Rio have fallen 38% since Aluminum Corporation of China – the nation’s largest maker of the metal – bought a 9% stake with Alcoa Inc. in February. BHP chief executive Marius Kloppers wants the Chinese company’s support for his takeover, which would create the world’s biggest producer of aluminum and energy coal.

“Rio Tinto probably won’t exist in a year’s time or in two year’s time,” said Davis, managing director of the U.K. unit of the largest publicly-traded U.S. money manager. “The Chinese paid a lot more per share than what the price is today.

Kloppers said recently that falling commodity prices and a slowing global economy would help convince investors to support the BHP bid, along with the Melbourne-based company’s higher profit margins and lower debt than its rivals. Rio CEO Tom Albanese  rejected BHP’s sweetened offer of 3.4 shares for each Rio share, saying the bid undervalued its assets and prospects.