Chinalco offered, refused Rio's olive branch -paper

Rio Tinto Ltd (RIO.AX: Quote, Profile, Research) (RIO.L: Quote, Profile, Research) offered a share in a planned iron ore alliance with BHP Billiton (BHP.AX: Quote, Profile, Research) (BLT.L: Quote, Profile, Research) to Chinalco as peace offering following the collapse of Rio's $19.5 billion deal with the Chinese firm, the Australian Financial Review said on Thursday.

Chinalco was offered a 5-10 percent stake in Rio's Hamersley mine operations amid fears of a Chinese backlash against the Rio-BHP tie-up, the paper said.

Rio pulled the plug on the Chinalco deal late last week in favour of a tie-up with BHP, but has drawn the ire of China, with the country's official news agency slamming Rio's "perfidy".

The collapse of the deal, through which Chinalco aimed at securing vital iron ore supplies, left China, the world's biggest steel-making nation, with only two suppliers -- the Rio/BHP combination and Brazil's Vale (VALE5.SA: Quote, Profile, Research), which together control 70 percent of global iron ore trade.

Chinese steel mills have called on competition regulators to block the Rio-BHP alliance, aimed at forging the world's biggest iron ore miner with annual production capacity topping 350 million tonnes in Western Australia's Pilbara region.

The Hamersley overture was put to Chinalco President Xiong Weiping last week by Rio Chief Executive Tom Albanese after discussions with BHP Chairman Don Argus, the Review said. BHP had accepted Rio's argument that China should be kept "inside the tent".

However Chinalco saw the offer as a second prize. Unnamed sources close to Chinalco told the paper it was "a shot across the bow that never gained any traction".

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