Miner Rio Tinto Scraps Chinalco Deal

The companies have signed a nonbinding agreement to establish the 50/50 joint venture, which covers all current and future iron ore assets and liabilities.

"Both companies believe the net present value of these unique production and development synergies will be in excess of $10 billion," BHP Billiton and Rio Tinto said in a joint statement.

Also, BHP Billiton will pay Rio Tinto $5.8 billion to equalize its contribution to the joint venture at 50 percent.

Chinalco said it would be paying very close attention to the tie-up between Rio Tinto and BHP Billiton. Last November, BHP called off its proposed $68 billion takeover of Rio Tinto. China had been unhappy over that potential joining of the two huge mining companies, fearing it might give them inordinate say over iron ore pricing.

BHP's stock jumped AU$3.07, or 8.74 percent, to close at AU$38.18 in Sydney.