Miner Rio Tinto Scraps Chinalco Deal

KRISTEN GELINEAU

SYDNEY (AP) — Anglo-Australian miner Rio Tinto PLC on Friday scrapped its $19.5 billion deal with China's Chinalco, choosing instead to raise $15.2 billion in a share sale and setting up a joint production venture with rival BHP Billiton Ltd.

Rio Tinto Chairman Jan du Plessis said in a letter to shareholders the planned deal with Chinalco was now dead and his company would pay it a $195 million break fee, thus ending what would have been China's biggest overseas investment to date.

The proposed deal with Chinalco had 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.

The move is a blow to China's aggressive moves to cement access to resources needed to fuel the country's rapid growth by taking strategic stakes in major producers.

"Although this deal did not go through, Chinalco's strategy of internationalizing its mining business has not changed in the least. Chinalco intends to continue developing its global mining and search for strategic opportunities," the company said in a statement.