Miner Rio Tinto Scraps Chinalco Deal

But there has been speculation about the status of the deal for several weeks as financial markets have strengthened significantly, making it easier for Rio to raise capital on its own.

In a statement, Chinalco President Xiong Weiping said the Chinese company had "worked hard" to "make appropriate amendments to the transaction terms ... to better reflect the changed market background and feedback from shareholders and regulators."

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.

Rudd told reporters in Canberra he would be meeting with Xiong — who is currently in Australia — later Friday, saying, "We welcome Chinese investment in Australia."

"This has been a commercial decision reached by Rio in terms of its evaluation of the proposal put to it by Chinalco," Rudd said. "I think it's very important that our friends in China focus on that fact."

Earlier Friday, Rio Tinto and its rival and former suitor BHP Billiton announced they will set up a joint production venture comprising all of their iron ore assets in Western Australia state, a move expected to save them billions.