Australia on Monday extended its review of Chinese aluminum maker Chinalco's $19.5 billion investment in global miner Rio Tinto, as major Rio shareholders voiced growing concern over the deal.

The Foreign Investment Review Board's (FIRB) decision to extend its review to June was widely expected, given the deal is China's biggest single offshore investment, is complex and has sparked both shareholder and political concerns.

Under the deal, announced last month, state-owned Chinalco would pay $12.3 billion for stakes in debt-saddled Rio's key iron ore, copper and aluminum assets and $7.3 billion for convertible notes that could double its equity stake in Rio to 18 percent.

Rio Tinto's fourth-largest shareholder in its Sydney-listed shares, Australian Foundation Investment Co (AFIC), raised concern about the deal on Monday, echoing protests by Rio's top UK shareholders and flagging potential conflicts of interest.

Significant influence has been given to Chinalco with no premium paid, AFIC said in a shareholder presentation released to the Australian stock exchange.

The fund manager owns a A$112 million stake in Rio Tinto Ltd. One of AFIC's board members and a member of its investment committee is Don Argus, chairman of Rio Tinto's spurned suitor, BHP Billiton.

We are deeply concerned about Chinalco becoming involved with the running of the business, AFIC said, highlighting Chinalco was government-owned and was a customer and competitor.

Rio Tinto has argued that the Chinalco deal would give it access to cheaper financing, a badly needed benefit for the company which is saddled with $39 billion in debt.

Shareholders are entitled to their view, and we continue to listen to them, a Rio Tinto spokesman said.

China's Export-Import Bank is talking to Rio Tinto about setting up a lending facility for joint venture projects with Chinalco or other Chinese companies, according to a letter, dated February 12, signed by Feng Zengbing, the deputy general manager of China ExIm Bank, and released by Rio on Monday.

NATIONAL INTEREST

The FIRB must make a recommendation to the government on whether the Rio Tinto-Chinalco deal is in the national interest. Australian Treasurer Wayne Swan will make a final decision.

The initial 30-day review period ended at the weekend. The extension had been expected given the complexity of the deal, which involves giving Chinalco two board seats and setting up marketing joint ventures.

The FIRB is seeking up to 90 more days to carry out its review, which would delay a final decision by Swan and hold up a vote by Rio Tinto's shareholders. Rio Tinto had hoped to convene a meeting of shareholders in May.

Rio Tinto declined to comment on the extension. Chinalco's spokesman was not immediately available for comment.

Rio Tinto shares fell 2 percent to A$50.98 in a broader market that was up 0.6 percent. BHP Billiton fell 1.4 percent.

Rio had aimed to complete the Chinalco deal by July, but the delay is likely to put that out to later in the third quarter.

The longer it takes for the controversial deal to go ahead, the tougher it will be for shareholders to reject it as global economic conditions worsen, commodity prices slide, and Rio grows more desperate to cut its $39 billion debt.

(Editing by Mark Bendeich and Ian Geoghegan)

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