PRESS DIGEST-Australian Business News - July 3

Compiled for Reuters by Media Monitors. Reuters has not verified these stories and does not vouch for their accuracy.

THE AUSTRALIAN FINANCIAL REVIEW (www.afr.com)

Mining company Rio Tinto (RIO.AX) says its US$15.2 billion rights issue aimed at cutting debt has been well received in the United Kingdom (UK) and Australia. The uptake for the UK part of the issue was close to 98 percent, while the results of Australian section, which also appears to have been heavily supported, will be released tomorrow. The raising is expected to pay down almost US$15 billion (A$18.6 billion) of Rio's US$38 billion debt associated with its acquisition of aluminium producer Alcan. Page 17.

- - - -

Rising steel production in China has increased pressure on the China Iron and Steel Association (CISA) to settle a benchmark price for iron ore. Figures released yesterday show Chinese steel production averaged 1.52 million tonnes per day in June, the highest daily output so far this year. The CISA has demanded that miners cut iron ore prices by more than the 33 percent already accepted by Japanese steelmakers. However, some of China's larger mills have already signed deals to buy iron ore at the price accepted by Japanese mills. Page 17.

- - - -

Australian oil and gas producer Santos (STO.AX) has taken a large stake in New South Wales (NSW)-based coal-seam gas explorer Eastern Star Gas (ESG.AX). Santos says it will pay Houston's Gastar Exploration A$300 million for its 35 percent interest in Eastern Star's Gunnedah Basin tenements in NSW and has signed a A$176 million deal to acquire a further 19.9 percent stake in Eastern Star from Hillgrove Resources. Santos chief executive David Knox yesterday praised Eastern Star for its success in extracting gas from the basin's coal seams. Page 18.

- - - -

Singapore Airlines-backed budget carrier Tiger Airways will begin flying between Sydney and Melbourne today in direct competition with Qantas Airways (QAN.AX) and Virgin Blue. Tiger says it will offer four flights daily with one-way fares beginning at A$39, and will begin flights from Sydney to Adelaide by the end of the month. The move comes amid increased competition in the aviation market, with broker JPMorgan reporting that Qantas suffered a 9 percent fall on domestic routes and a 28 percent drop on international routes in May. Page 18.