UPDATE 1-Rio's China aluminium stake sale seen in Jan-Feb

Rio Tinto has agreed to sell its half in a Chinese aluminium smelting joint venture to its partner Qingtongxia Aluminium and the deal is expected to be completed early next year, executives at the two companies said on Wednesday.

Rio, which is trying to sell up to $30 billion in assets to pay off debt, acquired the stake in the joint venture when it bought Canada-based aluminium group Alcan last year.

The venture is capable of up to 150,000 tonnes of aluminium smelting a year.

Both Rio spokesman Jim Singer and a senior Qingtongxia executive declined to say how much Rio agreed to sell the stake for because the sale was yet to be finalised. Alcan paid about $150 million in 2004 for the half-interest.

Reuters revealed that Rio was in talks to sell its stake when Chinese executives said in early December that Qingtongxia was aiming to consolidate its assets prior to a takeover by state-owned China Power Investment Corp,

The takeover is completing after China Power Investment Ningxia Qingtongxia Energy and Aluminium Group was formed on Dec 26.

The new group controls all Qingtongxia Aluminium's assets and is owned 70 percent by China Power Investment and 30 percent by the government of Ningxia region, the power firm said in a statement.

Qingtongxia's smelting capacity has increased to 700,000 tonnes a year in Ningxia, excluding the Rio joint venture, after it added a 270,000-tonne-a-year facility this month.

The capacity will rise to 850,000 tonnes, the second-biggest producer of the metal in China after Chalco, once the stake buy-back from Rio is completed.

Following a dramatic drop in world commodities prices and a sharp fall in ts share price, Rio earlier this month said it would cut 14,000 jobs and broaden an asset sell-off plan to raise more cash.

Most of Rio's debt was incurred from the Alcan purchase.

Rio had hoped to sell $10 billion worth of assets this year out of a planned $15 billion, but had to scrap that target due to the global economic downturn and credit crisis.

It has been trying to sell the downstream packaging and engineering units of its aluminium unit Alcan, its North American coal unit, its Minerals unit, the Northparkes copper mine in Australia and the U.S. Sweetwater uranium operation.

So far it has managed to sell only $3 billion worth of assets.

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