CORRECTED - CORRECTED-Rio wants more mining partnerships with China firms

(Corrects figures in paragraph 13 to millions of tonnes from percent)

BEIJING, March 22 (Reuters) - Rio Tinto, fighting a takeover bid by rival Anglo-Australian miner BHP Billiton, would like to work with Chinese state firms to develop mining projects around the world, Chief Executive Tom Albanese said on Saturday.

The partnership offer could draw some of the sting from acrimonious iron ore contract talks pitting Rio RIO.LRIO.AX and BHP BLT.LBHP.AX against Chinese steel mills led by Baosteel.

Speaking to reporters in Beijing, Albanese said he had no plans on this trip to meet executives from Baosteel Group, parent of Baoshan Iron and Steel Co Ltd 600019.SS, or from the China Iron and Steel Association.

Albanese said Rio Tinto, the world’s second-biggest mining company, was without peer in discovering world-class mineral deposits, but these were expensive to exploit and required significant infrastructure investment.

“There are opportunities for cooperation on a joint venture basis, or something equivalent to that, and I think that Chinese SOEs could be very much part of that picture,” he said.

Chinese state-owned enterprises (SOEs) could be useful in providing capital, engineering and technology for projects in Asia, Africa and South America, Albanese said, noting that Rio was already a partner with Chinese companies on a number of developments.

“I wouldn’t say that we have any active engagement under way in that area. But this is something I have a personal interest in pursuing,” he said.

Albanese, speaking on the sidelines of the China Development Forum, an annual conference organised by the government, said he was philosophical about the harsh words directed at Rio this week by senior figures in the Chinese steel industry.

“They are part of the process of engagement,” he said.

China is angry that Rio and BHP are trying to shift some iron ore cargoes into the spot market, where returns far exceed long-term contract prices because of voracious demand.

Several cargoes of Australian iron ore for spot delivery have been stranded at Chinese ports after Beijing delayed issuing permits, in what traders see as an attempt to sway the long-running contract talks.

“We haven’t had a material impact as a consequence,” Albanese said of the hold-ups.


Sam Walsh, chief executive of Rio Tinto’s iron ore business, said he hoped to sell up to 15 million tonnes of iron ore to China on the spot market in 2008, up from 4-5 million tonnes in 2007.

With demand so strong, Rio was willing to be patient in the contract talks, he said.

Rio and BHP are holding out for more than the 65 to 71 percent increase that Chinese steel mills agreed in February with Brazil’s Vale, the world’s largest iron ore producer.

Rather than adopting that benchmark, Rio and BHP have been emboldened by soaring spot prices to hold out for more based on their freight advantage: shipping costs from Brazil are more than double those of about $30 a tonne from Australia.

“The market is extremely tight. People are banging down our door to get hold of supply,” Walsh said. “We believe the fundamentals are going to get stronger, and we’re happy to wait until customers recognise the market fundamentals.”

Albanese said China accounted for 90 percent of the growth in seaborne iron ore trade, and there was no sign of a slowdown in steel demand in 2008 beyond what Rio had already forecast.

China’s economy would probably still grow by about 10 percent this year, with metals demand outpacing that by several percentage points, and was likely to increase steel capacity to 520-540 million tonnes from 487 million last year, he said.

Albanese said the rosy picture of sustained demand for commodities was why Rio had rejected BHP’s takeover bid.

“What they offer does not come close to remunerating the shareholders of Rio Tinto for what Rio Tinto can do in this very strong environment,” he said.

BHP is offering 3.4 of its shares for every Rio share. When it was made in February, the offer valued Rio at $147.4 billion.

Chinese state-owned aluminium group Chinalco muddied the waters last month by teaming up with U.S. firm Alcoa Inc to buy 9 percent of Rio for $14 billion.

Albanese said he had no plans on this trip to visit Chinalco, which has said it would be more interested in raising rather than cutting its stake in Rio. (Reporting by Alan Wheatley; editing by Chris Johnson)