By DANA CIMILLUCA, SHAI OSTER and AMY OR

Anglo-Australian mining giant Rio Tinto walked away from a proposed $19.5 billion deal with Aluminum Corp. of China, dealing a blow to China's ambitions to buy access to raw materials crucial for its economic growth.

The proposed deal would have given state-owned Aluminium Corp., known as Chinalco, an 18% stake in Rio Tinto, the world's third-largest miner and owner of rich iron-ore and copper mines in Australia and elsewhere. It also would have given the Chinese company direct stakes in some mining assets.

In addition, the investment would have extended a spending spree in which Chinese companies have laid out billions of dollars to acquire mining and energy assets around the world.

But Chinalco's plans fell victim to a potent mix of shareholder opposition, economics and politics, partly reflecting fears -- especially in Australia -- of the consequences of giving China direct access to a huge trove of natural resources. The deal's collapse, previously reported by Dow Jones Newswires, came just days before Australian regulators were expected to set tough conditions for their approval of it.

Rio Tinto moved quickly to line up other sources of cash to pay off $19 billion in debt coming due later this year and in 2010. Friday in Australia, the company said it planned to raise $15.2 billion by selling new stock to its shareholders in a rights issue. It said the move would reduce its net debt to $23.2 billion.

The company also turned to a former suitor, mining titan BHP Billiton. The two companies agreed to combine their western Australian iron-ore assets in an equally owned joint venture, with BHP paying Rio Tinto $5.8 billion.

Iron ore is a crucial steelmaking ingredient and has been the subject of tense talks with Chinese steelmakers, who are seeking lower prices from the world's largest iron-ore exporters, which include BHP and Rio Tinto. In a statement Friday, Chinalco Chairman Xiong Weiping said it was disappointed in Rio Tinto's pullout and will keep a watch on the miner's joint venture plans. Zou Jian, executive director of the Chinese Iron and Steel Association, said he couldn't yet call the proposed joint venture a new monopoly but said antimonopoly measures were available if molopolistic tendencies began to show.

The deal's collapse casts a shadow over China's plan to use its cash reserves to increase the global reach of its state-owned companies, particularly in the natural-resources sector. It also caps a turbulent two years for Rio Tinto, which was pursued by BHP before that proposed marriage fell apart.

Rio Tinto struck the Chinalco deal because it needed cash to pay back $8.9 billion of debt coming due in October, part of a debt load totaling almost $40 billion. The deal called for Chinalco to invest $7.2 billion in Rio Tinto in the form of convertible bonds and take $12.3 billion in stakes in a group of its mining assets. It would have given Chinalco two board seats.

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Rio Tinto's Jan du Plessis, shown in April, sounded out holders on the deal.

But a run-up in Rio Tinto's share price since the deal was struck in February made it increasingly uneconomical for the London-based company.

The deal faced opposition from the beginning from Rio Tinto shareholders because it would dilute their holdings. They also worried the company was selling prized assets at the bottom of the market. The opposition grew as Rio Tinto shares rallied, making the convertible-bond portion of the deal increasingly attractive for Chinalco.

Rio Tinto Chairman Jan du Plessis crisscrossed the globe in recent weeks discussing the Chinalco deal with shareholders, who would have needed to sign off on it. He had said he wouldn't submit a deal to them that they weren't likely to approve.

China's appetite for resource and energy assets has triggered a backlash. Some critics said a major Chinese presence in such a key sector of Australia's economy posed a threat to national security. Critics also charged that Chinalco would seek to leverage its position in Rio Tinto to get lower iron-ore prices as a means to prop up China's economic growth.

Chinalco said its bid was motivated purely by commercial interests, as it sought to diversify away from the weak aluminum-refining market into different metals and mining operations.

The demise of the Rio Tinto deal will bring up painful memories for China of another failed natural-resources foray: offshore oil company Cnooc Ltd.'s attempt to takeover Unocal Corp. of the U.S. four years ago. That deal fell apart after U.S. lawmakers raised concerns about the ties between China's government and businesses.

Afterward, China turned inward, and then focused on Central Asian, African and Latin American countries, where it could more easily win contracts. Lately, it has started to use loans to secure the resources it seeks, doing multibillion-dollar oil deals with Russia, Venezuela, Kazakhstan and Brazil.

Chinalco's experience, however, differs from Cnooc's. Rio Tinto was a willing partner, at least initially. Chinalco worked unusually hard, by Chinese-company standards, to raise its overseas profile and to grant foreign media access after the deal was struck.

The failure of the deal has allowed Australia's government to dodge a bullet of sorts. The country's Foreign Investment Review Board was due to decide on the deal by June 14. While the board has already approved several smaller Chinese transactions, the Chinalco deal was the most politically sensitive of all, given its size.

The Australian government recently approved a US$1.21 billion offer by China's Minmetals Corp. to acquire mining assets from OZ Minerals Ltd., after Minmetals revised its offer. The original takeover offer would have included reserves close to military zones.

But Australia's opposition Liberal-National coalition party said last month that it opposed the Rio-Chinalco deal, adding that it wasn't in Australia's national interest since it would give Chinalco "direct management involvement and a high level of influence."

The outcome is unlikely to slow China's overseas push, as its companies seek to take advantage of depressed asset prices. Moreover, Chinalco won't be left empty-handed. Rio Tinto will owe it a $195 million break-up fee.

Rio Tinto's rights issue would give shareholders the right to buy 21 shares for every 40 shares they hold at prices of £14 ($22.82) a share for U.K.-traded shares and 28.29 Australian dollars ($22.61) for Australian-traded shares. On Thursday, its share price fell 6.6% to £27.20 in London after declining 6.7% to A$66.90 on the Australia Stock Exchange.

—Peter Stein and Carlos Tejada contributed to this article.

Write to Dana Cimilluca at dana.cimilluca@wsj.com, Shai Oster