By intern reporter Shao Lige.

From Caijing Online

Rio Tinto stock dropped up to 4.7 percent Friday before closing at AU$ 51, or a 1.9 percent decline, following its announcement Thursday that the Australian mining giant will receive a US$ 19.5 billion cash infusion from Aluminum Corporation of China.

According to the terms of the deal, China’s leading aluminum producer, known as Chinalco, will invest US$ 7.2 billion in convertible bonds and US$ 12.3 billion in iron-ore, copper and aluminum joint ventures with Rio Tinto. The deal will enable Chinalco to increase its stake in Rio Tinto to 18 percent and seat two members on Australian company’s board.

Rio Tinto Chief Executive Officer Tom Albanese said on a conference call Thursday that this valuation represents the best value to shareholders. Past offers, such as a US$ 66 billion bid from Australian mining rival BHP Billiton, did not meet preconditions and were never presented to shareholders, he said.

Rio Tinto’s chair-elect Jim Leng opposed the deal in favor of a rights issue and resigned from his post on Sunday.

Addressing his rumored departure from the Chinese company, Chinalco general manager Xiao Yaqing said, “The decision to enter into the strategic partnership was one made by the entire executive board. Therefore, we do not believe that any human resource shifts will negatively affect the deal.”

The deal is still pending approval from the Australian and Chinese governments as well as from Rio Tinto’s shareholders. If the transaction is successful, it will become the largest overseas investment made by a Chinese enterprise.

Analysts are divided on the value of the deal.

Acknowledging that Rio Tinto may see lower pre-tax earnings and a weakened competitive standing, Barclay Capital analysts wrote in a report that “the key credit story for Rio Tinto has been the company’s liquidity and refinancing risk.” The cash infusion from Chinalco will go towards putting down the world’s third-largest mining company’s debt of US$ 38 billion.

Citi analysts maintained its buy rating on the iron-ore company, saying that “the Chinalco package at a premium to net-present value (NPV) in a difficult environment is preferable to discounted assets sales and/or rights issue.”

Goldman Sachs JBWere analysts, in contrast, were negative.

“We don’t like this deal and don’t think it is the best option,” they said in a note to clients. “Even with a cash injection of US$ 19.5 billion, Rio is still in a weak position in terms of its balance sheet and would be unable to easily participate in expansions, acquisitions or increased dividend payments for some time.”