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Chinalco keeps vision of mining global resources

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State-owned Aluminum Corp of China (Chinalco) will keep its dream of developing into a leading global diversified resources company alive despite the failure of its US$19.5 billion tie-up with Rio Tinto.

Rio yesterday scrapped the deal with Chinalco, its largest shareholder, choosing instead to raise US$15.2 billion in a rights issue and set up a joint venture with rival BHP Billiton.

Chinalco faced mounting opposition from shareholders and increasing political scrutiny in Australia, where Rio mines are considered a national strategic asset. Rising commodity prices also have placed Rio in less need of a cash injection from the mainland firm.

Rio will now sell 21 new shares for every 40 existing shares in London and Sydney at GBP14 (HK$174.09) and A$28.29 (HK$176.25) respectively, which could help it pay off debt from its acquisition of aluminium giant Alcan in 2007.

Rio's move is a serious blow to Chinalco as well as other mainland firms that have been keen to get their hands on natural resources to fuel China's rapid growth.

Mei Xinyu, a researcher at the Ministry of Commerce's Research Institute of Foreign Trade and Economic Cooperation, blamed the deal's failure on political sensitivities in Australia.

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