Rio names new chairman as Chinalco row escalates

By James Grubel and Sonali Paul

CANBERRA/MELBOURNE (Reuters) - Rio Tinto (RIO.AX) (RIO.L) named a new chairman to help get a planned $19.5 billion tie-up with China's Chinalco approved, as Australian politicians opposed to the deal raised their level of protest on Tuesday.

Designed to help Rio cut its $39 billion debt burden, the deal has aroused political concerns in Australia about key assets falling into Chinese hands and sparked complaints from investors who say one shareholder is being favored over others.

Jan du Plessis, chairman of British American Tobacco Plc (BATS.L), was appointed to the same position at Rio after a previous failed attempt to find a new chairman.

Last month, Rio chairman-elect Jim Leng quit the board after objecting to the Chinalco deal.

Du Plessis, a 55-year-old South African, will continue to be chairman of BAT, a post he has held since 2004. Du Plessis joined Rio's board as a non-executive director in September.

Du Plessis said the deal with Chinalco would give Rio Tinto the best platform to weather the global downturn.

Rio shares were down 3.8 percent at 2,021 pence by 1255 GMT (8:55 a.m. EDT) in London, underperforming a 1.4 percent decline in the British mining index .FTNMX1770 as copper prices slipped.

So far this year, Rio's London shares have outperformed the mining index by about 30 percent.

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One Australian politician took out television ads on Tuesday to push for the Chinalco deal to be blocked.

"The Australian government would never be allowed to buy a mine in China. So why would we allow the Chinese government to buy and control a key strategic asset in our country," Senator Barnaby Joyce said in ads airing in Canberra and his home state of Queensland, where Chinalco will pick up stakes in assets.

Under the deal, state-owned Chinalco would pay $12.3 billion for stakes in iron ore, copper and aluminum assets and $7.2 billion for convertible notes that would double its equity stake in Rio to 18 percent.

Australia's treasurer needs to approve the deal on national interest grounds, after which Rio Tinto plans to put the deal to a shareholder vote in an ordinary resolution, meaning it would need support from a simple majority for the deal to go ahead.

However, British shareholders have said the scope of the proposal, which would give Chinalco two seats on the board and joint venture rights on key assets, meant Rio should put up a special resolution, which would require 75 percent support.

Britain's Daily Telegraph newspaper reported Rio Tinto was considering whether to raise the approval threshold to 75 percent. The company declined to comment.