SYDNEY, Australia (AP) -- Nagging fears that a $19.5 billion deal with a major Chinese company could fail sent debt-troubled Rio Tinto's share price tumbling almost 9 percent Wednesday, just hours after the mining giant's newly-appointed chairman stressed the plan's importance.
Australian regulators earlier this week deferred making a decision on whether Aluminum Corp. of China, or Chinalco, should be able to double its stake in the Anglo-Australian miner, prompting some minority lawmakers to publicly oppose the deal saying it was selling off assets that should stay Australian.
The Foreign Investment Review Board said it would investigate the plan for another 90 days before making a recommendation to Treasurer Wayne Swan, who has consistently said he will only approve it if it is in the national interest. The plan also needs shareholder approval.
Rio Tinto's share price in Australia plunged, closing 8.67 percent lower at 47.50 Australian dollars. Shares are also traded in London.
On Tuesday, Rio Tinto named Jan du Plessis as its new chairman to replace Paul Skinner, who is retiring at the annual general meeting in London on April 20.
In a statement accompanying the announcement, du Plessis praised the Chinalco deal as a "platform to create shareholder value and to weather the tough and uncertain global economic conditions."
Sen. Barnaby Joyce, a maverick member of Australia's conservative opposition coalition, launched online commercials this week opposing the Chinalco deal by warning of the potential dangers of sending Australia's resource wealth overseas.
Independent Sen. Nick Xenophon on Wednesday supported that view.
"I think we should be selling the milk, not the cow -- in this case the minerals not the mine," Xenophon told Australian Broadcasting Corp. radio.
The Senate on Wednesday voted to open an investigation into plans by state-owned enterprises to buy Australian assets -- approving a motion authored by Joyce and directed at the Chinalco-Rio Tinto proposal.
The Senate Economic Committee was assigned to report to parliament by mid-year. The committee's report is not binding on the government.
Chinalco has offered to invest $12.3 billion in joint investments in aluminum, copper and ore mining with Rio Tinto, and to spend $7.2 billion on convertible bonds in the company. If redeemed for shares the bonds would almost double Chinalco's existing 9.3 percent stake in Rio Tinto Group to 18 percent.
Rio Tinto's board has backed the deal, which will help it deal with about $40 billion in debt that is mostly attributable to its purchase of Canadian aluminum producer Alcan Inc. in 2007. Rival miner BHP Billiton cited Rio Tinto's debt as a major risk when it canceled a $68 billion takeover bid in November.
Rio Tinto is axing some 14,000 jobs worldwide, selling assets and cutting capital spending to cope with a collapse in commodity prices triggered by the global credit crunch.
MF Global analyst Anthony Anderson said concern about the Chinalco plan was behind Wednesday's share price fall.
"It is the uncertainty surrounding the Chinalco deal, there has been a bit of talk out today that there is a lot of opposition to the deal and this is what's weighing on it," Anderson said. "The FIRB extension and the senate inquiry into foreign investment is adding to the uncertainty."
Goldman Sachs JBWere said in a note to clients that Rio Tinto shares would fall further if the Chinalco deal fails and no alternative is found quickly.