By Sonali Paul
MELBOURNE (Reuters) - Chinese state-owned aluminium group Chinalco will invest $19.5 billion (13.6 billion pounds) in miner Rio Tinto in a deal that will secure resource supplies for China and help cut Rio's debt but also raise regulatory scrutiny.
Rio shares in London tumbled as much as 18 percent on Thursday as investors worried that Rio was giving up too many stakes in prime mines and also not allowing all shareholders to participate in the fund raising.
As part of the biggest overseas investment by a Chinese company, Chinalco will spend $12.3 billion on stakes of up to 50 percent in nine of Rio's mining assets.
It will also buy $7.2 billion of bonds convertible into shares of the world's largest aluminium maker, second-largest iron ore miner and a top-five copper producer.
"People think they're giving too much away basically. From the Rio shareholder point of view, I guess you're going to have to vote for it, because otherwise the company is in dire, dire straights, but it's not ideal," said analyst Nick Hatch at ING in London.
"It seems to cover nearly all of the top assets of the company, it's broader than I would have expected, and I think people don't like the convertible bond side of things. Why not let all of the shareholders participate in a deeply discounted rights issue?"
Rio shares pared losses, but were still down 4.6 percent at 1,875 pence at 3:14 p.m., compared with a 5 percent loss in the UK mining index.
Rio's shares are down by around a fifth since rival BHP Billiton scrapped its $66 billion hostile offer in November, hit also by investor concern over Rio's $39 billion debt load, taken on when it bought Canadian firm Alcan in 2007. Continued...
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