Aluminum Corp. of China's (ACH) proposed investment in Australian mining giant Rio Tinto Ltd. (RIO.AU) is "absolutely favorable" and essential for the long-term future of the company, Rio Tinto's Chief Financial Officer Guy Elliott said Thursday.

"We might have had a (situation) where we couldn't have repaid (debt maturing) in 2010, and that's made us choose the Chinalco option," Elliott said, referring to the Chinese company as it is usually known.

But in the unlikely event of the deal not going through, the company still has other options, such as a bond or rights issue and more asset sales to raise funds, he said.

Australia's competition watchdog has already approved Chinese state-owned Chinalco taking a strategic stake in Rio Tinto, saying the deal won't influence iron ore prices.

The Australian Competition and Consumer Commission (ACCC) Wednesday said it won't oppose the $19.5 billion transaction that involves Chinalco acquiring stakes in several Rio Tinto assets, including iron ore mines, and increasing its interest in the miner to 18% from 9%.

The Chinalco deal is still subject to approval by Australia's Foreign Investment Review Board, which last week extended its review of the deal by 90 days.

The strategic advantages of the deal that haven't been highlighted are access to better intelligence on the Chinese market and access to exploration rights in China, Elliott said. "As a value proposition, this is absolutely favorable."

Delaying Iron Ore Settlement Beneficial

And customers in China may favor buying from a company with a Chinese connection, he said. China is the biggest market for iron ore, Rio Tinto's flagship product.

Elliott said he sees some benefits in delaying a settlement in ongoing negotiations on 2009 iron ore contract prices.

The company should wait for the market to recover before settling new term prices, he said at Asia Mining Congress 2009. "We see some benefits in not settling immediately."

While global economic growth indicators continue to be "pretty depressing," the stimulus measures announced by the U.S., China and other countries are bound to support metals prices, he said.

The 2009 contract year will begin April 1, but none of the big three miners - Rio, Brazil's Companhia Vale do Rio Doce (RIO) and Australia's BHP Billiton Ltd. (BHP.AU) - have yet concluded price negotiations with steel producers.

Steel producers including key Chinese mills have been asking for sharp iron ore price reductions of up to 40%-50% amid falling steel prices and slowing demand.

-By James Campbell, Dow Jones Newswires; 65 6415 4084; james.campbell@dowjones.com