Rio Tinto Shares Drop On Reports Chinalco Deal Off

Under the agreed deal, Chinalco would invest $12.3 billion in joint investments in aluminum, copper and ore mining with Rio Tinto, and spend $7.2 billion on convertible bonds in the company. If redeemed for shares, the bonds would almost double Chinalco's existing 9.3 percent stake in Rio Tinto Group to 18 percent.

But there has been speculation about the status of the deal for several weeks as the market has changed significantly since the deal was first struck.

In mid-May, the debt-laden miner said it was still commited to the deal in response to a request from the Australian Securities Exchange to try to explain a plunge in the company's share price. That share drop interrupted a rally in the stock since February, making the convertible bond that Chinalco was to buy less attractive for its shareholders.

The proposed deal with Chinalco has also sparked opposition in Australia, amid concerns that a foreign state-backed enterprise would own a strategic stake in the country's biggest natural resource assets.

Australia's Foreign Investment Review Board was due to make a decision on the deal, based on national interest, by the middle of this month, with Prime Minister Kevin Rudd's government then having the final say.