Chinalco in talks with Australian officials over plans for Rio Tinto

Senior managers from Chinalco, the Chinese mining giant that made a dawn raid on Rio Tinto stock last week, have flown to Australia for talks with government officials over their plans.

Chinalco executives, who spent last week in London orchestrating the buy-up of a 9 per cent stake in Rio, made the journey over the weekend, amid speculation that they are preparing a full-scale bid for the dual-listed miner.

Immediately after completing its stake-building exercise, Chinalco said it did not plan a takeover of Rio, but reserved the right to change its position if another bid emerging.

BHP Billiton, the Australian mining giant, which is considering a £70bn bid for Rio, has until Wednesday to make up its mind under Takeover Panel rules. If BHP does formally offer to buy the company, either on the terms it has outlined before or with an improved approach, Chinalco is likely to throw its hat into the ring.

However, the Chinese company would have to overcome one major disadvantage compared to BHP. The Australian government is notoriously reluctant to sanction the takeover of indigenous businesses by foreign-owned companies. Regulators could block a Chinalco buyout of Rio, even if the terms were more generous than BHP's, if they thought the deal was not in the national interest – which is why Chinalco executives are keen to discuss their plans with the Australian government.

While they will seek to tread carefully in the talks, Chinalco will stress the importance of China's trading links with Australia. In the Chinese's favour, Kevin Rudd, the newly elected Australian Prime Minister, is a renowned Sinophile who speaks fluent Mandarin.

Nevertheless, for now an outright bid for Rio remains theoretical, with the Chinese company content to sit on its hands until BHP makes its intentions known.

The Australian giant spent the weekend working on revised proposals for Rio, but has yet to make a final decision on whether to launch a bid. That decision is unlikely to be made until the last minute. BHP has until 5pm on Wednesday to make an offer, or agree to walk away for at least six months, but wants to watch developments before showing its hand.

If an offer is forthcoming, it will be an improvement on the proposal BHP tentatively made in November, which Rio dismissed as undervaluing the company. The miner has accepted that there is little point simply re-presenting its previous offer, particularly since the price paid on Friday by Chinalco for its stake in Rio was much higher than the value of the deal previously put on the table by BHP.

The mining industry is also keenly watching the developing situation at Xstrata, which is understood to be close to agreeing terms for a tie-up with Vale, the Brazilian mining conglomerate, a deal that could also be scuppered by Chinese interference, according to market rumours.

China wants to prevent further consolidation in the mining market because, as the world's largest buyer of commodities, it has the most to lose from declining competition.

In the case of the Rio situation, while most analysts have focused on the huge demand in China for steel, which leaves the country dependent on securing supplies of iron ore from miners, insiders at Rio believe Chinalco's interest may be based on its aluminium assets.

Chinalco itself has had to cut back on aluminium production because it has been unable to secure enough coal to run its plants at full capacity.

Rio has also noted the fact that the US firm Alcoa was a junior partner in Chinalco's swoop on the company. Last year, Rio beat Alcoa in the race to buy Alcan, the Canadian aluminium giant.