Updated from 2:27 a.m. EST

Rio Tinto

( RTP) has formed a partnership in which

Aluminum Corp. of China

(ACH) - Get Report

, or Chinalco, plans to invest $19.5 billion in the mining company.

Under the deal, Chinalco will invest $12.3 billion in certain aluminum, copper and iron ore joint ventures, Rio Tinto said in a statement Thursday.

Rio Tinto will issue to Chinalco subordinated convertible bonds for a total of $7.2 billion. If converted, the subordinated convertible bonds would increase Chinalco's current stake to about 18% in Rio Tinto Group.

Rio Tinto said the partnership raises "significant funds at a time when financial markets are distressed," reduces its debt and strengthens its balance sheet.

The investment in Rio Tinto is China's biggest overseas investment so far.

In a statement, Chinalco's President Xiao Yaqing said the "strategic partnership represents a key step in Chinalco's development into one of the world's leading natural resources companies."

Rio Tinto also reported a 50% decline in 2008 net earnings to $3.7 billion from $7.3 billion a year earlier. The company recorded a charge of $8.4 billion related to asset impairments, partly offset by gains of $1.5 billion from asset divestments.

Underlying earnings in 2008 rose 38% to $10.3 billion.

Earlier this week, Rio Tinto's Chairman-elect Jim Leng quit less than a month after being named to the board of the debt-laden mining giant, reportedly because of disagreements over the deal with Chinalco.

Rio Tinto is aiming to pay back about $10 billion of its $38 billion debt mountain by the end of 2009 by axing some 14,000 jobs worldwide, selling assets and cutting capital spending.

The company hasn't provided an explanation for Leng's sudden departure.

For now, Rio Tinto incumbent chairman, Paul Skinner, remains. He cast the Chinalco deal as a "clear of vote of confidence" in the company's prospects and the outlook for commodities.

The move will give the Anglo-Australian company greater access to China, where demand for raw materials has soared in recent years, he said.

Meanwhile, BHP Billiton

(BHP) - Get Report

may look to gatecrash the deal if it feels the Chinese company is getting assets cheaply, reports U.K. newspaper the

Times

. Rio Tinto fought off a hostile bid from BHP last year.

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