Australia has welcomed a report saying that China did not blame Rio Tinto or the Australian government for the collapse of a $19.5bn tie-up between Chinalco and the Australian mining giant.
The Australian Age newspaper reported from Beijing that a detailed report to the State Council, or China's cabinet, blamed economic forces and a powerful public relations campaign by BHP Billiton for the failure of what would have been China's biggest offshore investment.
Australia's Trade Minister said the report should help heal Sino-Australian relations, soured over the failed bid, and that Australia continued to welcome foreign investment to help expand its iron ore production.
“That's an important concession, if it's true, and we welcome that, and hope that not only was it a learning process, but it provides the basis for moving forward with our relationship with China on a more solid footing,” Crean told reporters.
Chinalco had agreed a $19.5bn equity and asset tie-up to help rescue Rio Tinto from its debt woes in February 2009, which the Anglo Australian miner abruptly called off in June, opting instead to raise money through a rights offer and form an iron ore joint venture with BHP.
The collapse of the deal damaged relations between Australia and China. A month later, at the height of fraught iron ore negotiations, China arrested four Shanghai-based Rio Tinto staff, including Australian citizen Stern Hu, on allegations of spying and bribery, deepening the rift.
“Objectively speaking, the failure of the merger between Chinalco and Rio Tinto lies in the rapid recovery of the world resources market, including the related stock market, which was beyond everyone's expectations,” the Chinese report said, according to the Age newspaper.
Chinalco Vice President Lu Youqing told reporters he had not read the report, but added: “The case is over.”
“We have analysed it already. It is a normal business activity and not every activity has to be a successful one. Also, an unsuccessful one is not necessarily a bad thing.
“What we are thinking now is what to do next to develop the company, not struggle with the past,” Lu said.
The Chinese government's report said the deal failed because Chinalco did not do enough to engage other Rio shareholders or to fight the public relations war in Australia, the Age said.
Rio kept Chinalco informed about its talks with BHP, and the State Council accepted that as global conditions improved it made more sense for Rio to link up with BHP in an iron ore joint venture than to tie up with Chinalco, a customer, according to the report the Age cited.
“One important reason for blocking the vertical merger is conflict of interest, that is, when the major customer of Rio Tinto enters the board of directors, it will have certain rights to speak on product pricing which may harm the interests of Rio Tinto's other shareholders,” it said.
The report concluded that China underestimated the backlash to the deal and the effectiveness of a campaign led by Rio's rival BHP against the Chinese state-owned company owning key resources in Australia.
It also outlined several mistakes China made that led to it losing the public relations war in Australia, including launching two other resources bids at the same time, Chinalco not lobbying enough, and not communicating with Rio Tinto's key shareholders.
It also said Chinalco tried to grab too much in the one deal, seeking a bigger equity stake and joint ventures in assets.
Rio Tinto had no immediate comment on the report and BHP declined to comment on it.