Mining group Rio Tinto has risen 9p to £23.91 despite more signs of problems ahead for its controversial $19.5bn investment from Chinese-owned Chinalco.
The Australian government has just blocked a $1.7bn takeover of OZ Minerals by China's Minmetals on national security grounds. The surprise move is because the Prominent Hill mine is near an area used for weapons testing. The two companies are now expected to look at a revision of the deal which might exclude Prominent Hill.
Some analysts believe this move should not necessarily impact on Rio and Chinalco, since it appears company specific. But John Meyer at Fairfax commented: "Australian foreign investment review board approval for the Rio Tinto/Chinalco deal looks less likely following the OZ Minerals knockback."
Separately there were reports today that the government would only approve the Chinalco tie-up if Rio made its board more Australian by bringing back key posts from London.
Yesterday Rio's finance director said it had a Plan B if the Chinalco deal fell through, which could include selling more assets and a possible rights issue.
Meanwhile, in a note on the mining sector, Deutsche Bank has raised its price target for Rio from £26.27 to £26.63. The bank has also lifted its target for Xstrata - up 12.5p to 476.25p - from 531p to 569p. Deutsche said:
"There remain a number of oversold stocks in the sector with our preferences being Xstrata, Rio Tinto and Eurasian Natural Resources Corporation."
ENRC, however, has fallen 18p to 462p after its shares soared yesterday.
