The weekend was hardly a time of rest and relaxation for Rio Tinto
Rio Tinto needs the $19.5 billion infusion Chinalco would provide, potentially doubling its stake in the Anglo-Australian giant to 18%. This would allow Rio Tinto to make good on a nearly $10 billion debt payment coming due during the fourth quarter. The debt was incurred in 2007 during happier days for the credit markets, when Rio Tinto borrowed more than $38 billion in cash to buy Canada's Alcan, trumping a bid from Pittsburgh-based Alcoa
Now things have changed, and Rio Tinto needs funds for its debt repayment this year. Its prospects for receiving Chinalco's help were perhaps diminished over the weekend when Swan rejected an effort by China Minmetals Corp. to acquire Australia's OZ Minerals Ltd. While a portion of Swan's rationale involved OZ facilities covering an Australia weapons testing range, the decision nevertheless may have implications for Rio's proposed sale.
Despite a potential nixing of the Chinalco deal by Australian authorities, there appear to be other outlets open to Rio Tinto. For instance, a rights issue is a possibility, as is a bond offering. But neither of these options would likely take care of the company's debt repayments in both 2009 and 2010.
Rather, and perhaps not surprisingly, Australian mining giant BHP Billiton
Perhaps we haven't. So, all Foolish investors with a notion that commodities likely will again head north -- and that's probably most of us -- should, in my rarely humble opinion, pay extremely close attention to Rio Tinto and BHP Billiton as well. I'm not sure this story is over, and its conclusion could prove profitable for shareholders of both companies.
For related Foolishness:
Fool contributor David Lee Smith doesn't have financial positions in any of the the companies in the above article. He does, however, welcome your questions or comments. The Fool has a disclosure policy.