Chinalco invests $19.5 billion in Rio Tinto to raise stake to 18 per cent

China's state-owned Aluminium Corporation of China (Chinalco) will put $19.5 billion into troubled mining giant Rio Tinto, Beijing's biggest investment ever in a foreign company.

The "strategic partnership" would give Chinalco stakes in mining assets as well as bonds convertible to Rio shares, which could eventually raise its overall stake in Rio to 18 per cent, two companies said.

Rio will raise a further $7.2 billion by issuing Chinalco convertible bonds, which will be converted into shares in seven years, increasing the Chinese company's holding in Rio from 9 per cent to 18 per cent.

The investment would give China more leverage over the resources and raw materials to fuel its economic boom.

The boards of Rio Tinto Plc and Rio Tinto Limited (Rio Tinto) today unanimously recommended to shareholders a transaction with Aluminium Corporation of China ("Chinalco"), a leading Chinese diversified resources company.