Only one month since Valin Steel in central China's Hunan Province announced its deal with Fortesue Metals Group (FMG), Australia's 3rd largest iron ore vendor, rumours are spreading on the market that Chinalco has been in contact with FMG about a potential M&A deal.

Chinalco's vice president Lv Youqing however described the rumour as "groundless" in a clarification to China Business News.

The arrangement between Valin and FMG was concluded on April 29. Little more than a month later, on June 5, Rio Tinto tore up the US$19.5 billion framework deal with Chinalco and switched its strategic goal to launching a JV with BHP Billiton. Rio Tinto is looking to collect as much as US$15.2 billion through issuing lettings.

The rumour has broken at a time when Chinalco still faces the dilemma of whether or not to subscribe to shares in the Rio/BHP JV. On the other hand, Valin's negotiations with FMG, along with the Rio Tinto–BHP alliance, have both helped to boost FMG's stock price, which has risen by more than 50 percent since June 5, when Chinalco lost the deal with Rio Tinto.

For more information, please consult the coverage in Chinese at:

http://www.china-cbn.com/s/n/000004/20090622/000000118534.shtml

(China.org.cn by Maverick Chen, June 22, 2009)