Considerations which lead all right in China

The issue of debt is, of course, the main cause of the somewhat forced marriage between Rio Tinto and its imposing Chinese shareholder, the State holding company of Chinalco aluminum. But this is not the only one. Rio Tinto also emphasized the industrial logic of this approximation. China is the main consumer of its three flagship products.

The first iron ore. This product has contributed 51 of the profits of Rio Tinto in 2008. And China is by far, the largest world importer with a share of international trade of 46. Aluminum, then, which, in 2008, represented 10 of the profits of Rio Tinto. China does not matter the base metal. With a further, albeit insufficient, fabric of refineries, the former empire of the Middle exports 3 of the grey metal sold internationally. On the other hand, China is relatively poor materials aluminum, bauxite and alumina first. However, at the resumption of Alcan, in October 2007, Rio Tinto had stated his intention to focus specifically on the headwaters of the grey metal chain. The mining group was able to resist the Chinese who wanted to enter directly to the capital of Rio Tinto Alcan, or even buy it in bulk. The third central Rio Tinto product, copper, helped 15 of the result in 2008. China is the first consumer country and world importer with respective market share of 27 and 22.

Strategic position

By sealing a strategic partnership with a representative of the third economic power, the anglo-australienne company acquires a choice position to develop its business. This element should be taken into account when the two allies have set the price of minority interests in Rio Tinto operations transferred to Chinalco. Bernstein analysts believe that these interests have valued the assets concerned to 5.9 times their Ebitda against a valuation of the entire group of 5.3 times its Ebitda is expected by the consensus. The premium granted by Chinalco was relatively modest in view of the quality of the mines and factories pooled but that's not counting with the large entry door of Rio Tinto in China.

The last factor that prompted Tom Albanese and Paul Skinner firm to get engaged with the Chinese is the Outlook for the markets of natural resources. In addition to the presentation of the results in 2008, the Chief Economist of Rio Tinto, Vivek Tulpulé, expressed his expectations. "Our short-term forecasting is very different from that made in the first half of 2008." "It now reflects a much more negative global macroeconomic environment," he says to at the outset. Will "relief sustained demand for raw materials not intervene until next year." In addition, there are risks that 2010 may be low. Other financial shocks may occur. "It is not excluded that the application of measures to stimulate the economy are behind", says the expert. Therefore, "it is clear that the world economy went in a cyclic adjustment process onerous and potentially extended". Only certainty at this point: "In the long term, the development of emerging markets will strengthen demand for metals and minerals." Considerations which lead all right in China....