Aluminum Corp of China's proposed US$19.5 billion investment in Anglo-Australian mining giant Rio Tinto appeared to be heading toward failure last night as the miner turns to other options for fund raising.

A statement explaining the breakup will be issued early today, said a spokesman for the Chinese company, also called Chinalco. Rio's board gathered in London overnight for a meeting on the issue and discussion of a US$195 million breakup fee.

Western media speculated late yesterday that Rio was exiting the deal - the biggest in corporate history in both China and Australia - sending Rio's London-listed shares tumbling as much as 10 percent in afternoon trading.

The Australian press said Rio will be able to raise up to US$15 billion through a rights issue as conditions have improved in the debt and equity markets since February, when the Chinalco-Rio deal was announced. And one Australian newspaper speculated that Rio may instead pursue a deal with former takeover suitor BHP Billiton, also its rival. Rio rejected a hostile offer from BHP in November.

Rio didn't deny the speculation, saying late yesterday that it "is pursuing a range of options, some of which are at an advanced stage, for maximizing shareholder value and improving the group's capital structure."

The deal has been viewed as a major step in the efforts of Chinese companies to acquire overseas resources, taking advantage of a slump in commodity prices.

It was also expected to benefit China's steel industry. China is the top buyer of iron ore and Rio the world's second-largest supplier.

Rio last month agreed with other Asian mills on a 33 percent reduction in this year's term prices for iron ore while China insisted on deeper cuts as talks dragged on.

Chinalco Chairman Xiong Weiping was expected to fly back to Beijing today after making a brief visit to Canberra, capital of Australia, where he talked to government officials about the deal.

(Shanghai Daily June 5, 2009)