Rio Tinto Group has scrapped a planned $19.5 billion investment by Aluminum Corp. of China, or Chinalco, and will instead seek to raise $21 billion from a share sale and by selling iron ore assets to BHP Billiton Ltd.

The world’s No. 3 miner announced the new deal Friday, after the Chinese-state owned steelmaker rejected amendments to its initial agreement, leading to a breakdown in talks.

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