Rio Tinto says committed to Chinalco tie-up

(Reuters) - Miner Rio Tinto (RIO.AX) remains committed to a planned $19.5 billion tie-up with Chinese metals firm Chinalco, it said, responding to talk that the deal may be revised to let more shareholders take part in a rights issue.

The latest endorsement of Chinalco, already Rio's (RIO.L) largest shareholder, also comes amid speculation the Australian government could demand revisions, or kill the deal under foreign investment guidelines because Chinalco is state-owned.

Rio Tinto shares were up 7 percent at A$61.66 on Friday, recouping much of a previous heavy slide on market talk it might renegotiate the most controversial part of the deal -- a $7.2 billion issue of convertible bonds to Chinalco.

Speculation had focused on whether Rio would tweak the bonds issue to make it available to all Rio shareholders, not just Chinalco, or on whether the deal could be scrapped and another strategic investor brought in, perhaps rival miner BHP Billiton (BHP.AX) (BLT.L).

"The company remains committed to delivering this strategic partnership," Rio Tinto said in response to a query from the Australian stock market over the movements in its share price.

The deal as it stands would double Chinalco's Rio stake to 19 percent.

The Australian Financial Review newspaper said on Friday Chinalco would consider changing the terms of the convertible bonds, but was adamant the other major element of the tie-up -- $12.3 billion in direct investments in key Rio mining assets -- should remain as agreed in February.

Citing no sources, the business daily said Rio Tinto's director of strategy, Doug Ritchie, was believed to have visited Chinalco officials last week to discuss investors' opposition to the deal and possibly to revise the terms of the bond issue.

Chinalco President Wang Wenfu was believed to be pragmatic over the price of the notes, the newspaper added.

"Anyone who's underweight in Rio will obviously want a massive dilutive rights issue, because it actually helps them," said a fund manager in Australia who owns shares in Rio and BHP and who did not want to be named.

"Perhaps then, you can get into Rio at a much lower price. But if you're overweight Rio, then having a highly dilutive rights issue is just nuts," the manager said.

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