RIO Tinto is considering changes to a key component of its $US19.5 billion ($26.5 billion) rescue deal with Chinalco, in a move designed to appease shareholders and the Rudd Government.
Rio is understood to be considering a compromise scenario where Chinalco's convertible bond purchase would be limited to it raising its stake in Rio to about 15 per cent, instead of 18 per cent under the current deal.
This would mean 3 or 4 per cent of share capital, valued at about $US3 billion, would be offered to shareholders.
Reports out of London at the weekend were strongly pushing the line that an amended deal was a live option.
As well as trying to placate shareholders angry they have not had the right to participate in a capital raising -- which has particularly riled British investors -- a stake kept at just below 15 per cent may also make the deal more appealing to the Rudd Government. Chinese state-owned aluminium giant Chinalco has agreed to get Rio out of its debt mire by buying $US7.2 billion of convertible bonds to boost its Rio stake from 9 per cent to 18 per cent.
It would also buy a $US12.3 billion stake in Rio's best assets.
But as well as angering shareholders -- who will vote on the deal if it is approved by Wayne Swan -- the rescue package has run into political hurdles.
Liberal Opposition leader Malcolm Turnbull has joined Nationals senate leader Barnaby Joyce and Greens leader Bob Brown in voicing opposition.
Rio's tough sell to shareholders has become even tougher recently, as the local share price continues to trade above the $US45 strike price of the first tranche of convertible bonds to be issued to Chinalco under the deal.
Other avenues to deal with Rio's growth-crippling debt, which it acquired in the $US38 billion takeover of Alcan in 2007, are also arising as global credit markets begin to thaw.
There is also growing speculation BHP Billiton may make an alternative deal, following reports BHP chairman Don Argus met his Rio counterpart, Jan du Plessis, in Sydney last month.
While big investors in Australia have not been canvassed about a change to the deal, there is a feeling among them that the terms of the bond would also need to be changed to secure a vote.
Rio's local shares continued to rise above the strike price yesterday, gaining $3.12, or 5 per cent, to a fresh five-month high of $67.30 ($US49.49).
The British shares of the dual-listed miner closed at pound stg. 28.50 on Friday, narrowing their discount to the bond issue to 5 per cent.
Rio yesterday would not confirm or deny whether it was looking at alternatives to the deal.
Mr du Plessis, in his only public outing to date in his new position, recently told reporters in Sydney he was committed to the terms of the current deal.
However, he added the company would not put a deal to shareholders that it was not confident would be approved.
Chinalco yesterday said it was not aware of any changes being planned to the deal.
"The deal is still under review (from regulators), and I haven't heard of any changes from Rio," Chinalco vice-president Lu Youqing told Dow Jones Newswires.
Chinalco is believed to be amenable to changes in the structure of the bond issue to get the deal through, but not prepared to waver on the 15-50 per cent stakes it agreed to buy in Rio's premium iron ore, aluminium and copper assets.
If talks with Australia's Foreign Investment Review Board are indicating Mr Swan wants Chinalco's stake restricted to below 15 per cent, that would make Chinalco more amenable to a change.
When Chinalco bought a 9 per cent stake in the Rio group in 2007, the Treasurer gave the miner belated approval to go to 14.99 per cent of the British shares -- or 12 per cent of the group -- without needing to seek fresh approval.