Chinalco's 12% Rio stake in jeopardy

The collapse of Lehman Brothers has put the spotlight on BHP Billiton's takeover of Rio Tinto, with Chinalco in urgent talks with Lehman Brothers' liquidators to retrieve a 12 per cent stake it holds in Rio.

According to a website report of London's The Telegraph, Chinalco is holding talks with liquidators in Hong Kong over the Rio stake it bought together with Alcoa in February, which was then worth at $US14 billion.

The stake, which would have stopped BHP from gaining compulsory acquisition of Rio, was bought on concerns on Chinalco's behalf that a merged entity would control the market for iron ore.

Chinalco is a very large consumer of the commodity.

Alcoa lost its takeover bid for Alcan to Rio.

Without naming any sources, the report said the row over the stake has escalated to senior levels of government, with Beijing putting pressure on Hong Kong to hand over the stake.

However the liquidator has not released the holding and may decide Chinalco ranks alongside other creditors of the bank's break up.

The paper said in a worse case scenario, this could see Chinalco suffering a substantial loss on its holding.

Chinalco and Alcoa own the shares in Rio through a Singpore-based vehicle called Shining Prospect with Chinalco owning the majority of the stake.

The stake was in a Lehman custodian account. The paper said it understood that Chinalco is trying to move the holding to another custodian.

Shares in Rio on the ASX have slumped 15 per cent to $66.89 just before market close today.