(Caijing.com.cn) Anglo-Australian miner Rio Tinto said it has scrapped its proposed US$19.5 billion tie-up with Chinalco in favor of a US$15.2 billion rights issue.

Chinese state-owned Chinalco said in a separate statement on the same day that it regrets Rio's decision but will continue to explore opportunities overseas to achieve its goal of becoming a global metals company.

Rio has also signed a non-binding agreement with BHP Billiton to set up a 50-50 joint venture that includes all its current and future Western Australian iron ore assets, the company said in a statement filed with the Australian Stock Exchange on June 5.

BHP, which dropped a bid to buy Rio last year, will pay US$5.8 billion for a 50 percent equity interest in the venture.

Rio surged 10.12 percent to A$73.67 at 12.12 p.m. in Sydney on the announcement, while Chinalco's listed arm, Aluminum Corp. of China Ltd., slipped 1.7 percent to HK$8.09 at 10.19 a.m. in Hong Kong.

The rights issue will be priced at A$28.29 per share in Australia and 1,400 pence apiece in London, with 21 new shares offered for 40 existing shares, Rio said.

The rights issue will help the company reduce net debt to around US$23.2 billion, exceeding the commitment made in December 2008 to cut net debt by US$10 billion by the end of 2009, according to the statement.

Rio said it had discussed amendments to the transaction with Chinalco, in light of the improved financial markets and shareholder feedback, but a revised agreement had not been reached.

“Since we announced the Chinalco transaction in early February, financial markets have seen a significant improvement, the financial terms of the transaction became markedly less valuable,” said Rio's chairman, Jan du Plessis.

Rio said it would pay Chinalco an agreed break fee of US$195 million.

The world's third-largest miner said in the statement it remains interested in future collaboration with Chinalco and continues to recognize the importance of China market.

Under the deal, Chinalco proposed to buy US$7.2 billion worth of convertible bonds from Rio and stakes in iron ore, copper and aluminum projects for US$12.3 billion.

The proposal was to result in Chinalco's stake in Rio rising to 18 percent from the current 9.3 percent.

Rio, the world's third-largest miner, said in the statement it remains interested in future collaboration with Chinalco.