Aluminum Corp. of China is in "intense" talks with Rio Tinto PLC (RTP) about a potential $20 billion investment and a seat on Rio's board, officials involved in the deal said Tuesday.

Both sides are discussing the size of the deal and the financing involved, Lu Youqing, Deputy General Manager of Chinalco told Dow Jones Newswires, but declined to disclose details.

Chinalco is also seeking a seat on Rio's board as part of the talks, said Lu.

The possible deal comes as Chinalco is faced with a management shake up that would see its chairman Xiao Yaqing replaced by Xiong Weiping, a former company vice-president, according to a Chinalco official who declined to be named.

Rio Tinto, which is looking for help to pay down some of its US$38.9 billion debt, said earlier this month it is talking with the Chinese firm on a possible sale of minority stakes in some of its mining operations and an investment in convertible instruments.

A person familiar with the situation said talks centered on a deal worth up to US$20 billion. The deal could be announced as early as Thursday when Rio posts its 2008 results, according to several media reports.

A Rio Tinto spokeswoman would only say that Rio is considering a number of options and that it has already advised the market of its talks with Chinalco. The company has also indicated it may consider a rights issue. No final decision has been made on which option to pursue, she said.

Chinalco became Rio Tinto's biggest shareholder last year after it teamed up with Alcoa Inc. (AA) to pay US$14.1 billion for a 12% stake in Rio Tinto's London-listed stock, giving it a stake of about 9% in the dual-listed group.

This investment represented the biggest overseas investment by a Chinese firm on record.

The Chinalco official who spoke on condition of anonymity, said earlier Tuesday that "money shouldn't be a problem" for Chinalco in closing the deal.

State-controlled China Development Bank helped Chinalco finance its first Rio Tinto investment last year. However, analysts said financing may be harder to come by this time as a result of the financial crisis though industry experts said CDB may again help with funding.

An official at CDB's news department said his department was unaware of the matter.

Bank of China Ltd. (3988.HK), one of the country's largest banks, has been involved in negotiations about the potential deal, an official at the bank who is familiar with the matter said Tuesday. He didn't give details about Bank of China's role but when asked if the bank may help finance the potential deal, he said it's not yet decided.

Separately, a person in the banking industry said Bank of China is seeking to be the settlement bank for the possible deal.

In August last year Australian Treasurer Wayne Swan gave Chinalco approval to up its stake in Rio Tinto's London-listed stock to 14.99%. Chinalco gave an undertaking it would not raise its stake beyond this level without seeking approval from the Australian government and would not seek a board seat while its stake was under 15%.

"A deal could give Chinalco those voting rights. This is very important to Chinalco," said Wang Lixin, of Beijing metals consultancy Umetal.

Swan recently said the Australian Government has not changed its stance on foreign investment, which includes a closer focus where buyers of mining assets are also consumers of the mines' products, such as Chinalco.

Chinese authorities on the other hand appeared in favor of the deal. In principal China encourages its companies to expand into international markets, said China's Foreign Ministry spokeswoman Jiang Yu Tuesday, when asked during a regular news briefing about the possible deal between Rio and Chinalco.

 
   New Chinalco Chairman

Xiao, who joined Chinalco in March 2002, will be promoted to a "more senior position" outside the company, the Chinalco official said, which means Xiao would also leave his post as president of Chinalco's listed unit, Aluminum Corp. of China Ltd. (ACH), or Chalco.

Xiong, 52 years old, was a vice president of Chinalco from 2000 and left to join China Travel International Investment Hong Kong Ltd. in 2006, where he is now a vice chairman and general manager.

Xiao will be promoted to the State Council, according to the South China Morning Post.

An official from the general manager's office of China Travel International said the company hasn't received any notice about Xiong leaving.

"Xiong is still working here now," said the official, who declined to be named. She didn't elaborate.

Chalco's shares were suspended from trading in Hong Kong and Shanghai Tuesday.

In a statement to the Hong Kong stock exchange, Chalco said its H shares were suspended pending the release of a company clarification on media reports about management changes.

-Juan Chen and Chuin-Wei Yap contributed to this story; Dow Jones Newswires; 8610 6588 5848; juan.chen@dowjones.com

(Alex Wilson in Melbourne and Victoria Ruan and Aaron Back in Beijing also contributed to the story)