Rio Tinto Group, the world's third- largest mining company, said first-half profit tumbled 65 percent after copper, iron ore and aluminum prices fell.

Net income declined to $2.5 billion, from $6.95 billion a year earlier, London-based Rio said today in a statement. Underlying earnings, which exclude some one-time items, declined 54 percent to $2.6 billion, missing the $2.73 billion median estimate of seven analysts surveyed by Bloomberg News.

Chief Executive Officer Tom Albanese has grappled with debt which had ballooned after Rio's $38.1 billion purchase of Canadian aluminum producer Alcan Inc. in 2007. Rio cut spending and jobs, raised $21 billion in a share sale in June and agreed to create an iron-ore joint venture with its biggest rival BHP Billiton Ltd. to help pay debt after commodity prices plunged.

"We expect the company to focus on its recovery potential, now that the rights issue has successfully reduced the group's debt load," Nick Hatch, an analyst at ING Groep NV in London, wrote in an Aug. 17 report.

Rio declined 0.3 percent to A$58.03 at the 4:10 p.m. Sydney time close on the Australian stock exchange. The shares have gained 94 percent.

Rio, the world's second-largest iron ore producer, is embroiled in a spying row in China just as talks on annual iron ore contracts with Chinese steelmakers remain deadlocked.

Chinalco Rejection

China, the largest iron ore buyer, last week formally arrested four Rio executives including Stern Hu, an Australian and head of the company's iron ore business in China. The four, who were detained in Shanghai on July 5, and faces charges of bribery and stealing commercial secrets from China's steel industry. Rio said it will support the employees in defending against the allegations.

The arrests came a month after Rio rejected a proposed $19.5 billion investment from state-owned Aluminum Corp. of China, also know as Chinalco, in favor of the BHP venture and a rights offer. The deal would have allowed Chinalco to double its stake in Rio and own a share in some mines.

The iron ore talks have stalled as the China Iron & Steel Association demands a cut from last year's record price that's steeper than the 33 percent agreed on by Japanese and Korean customers. China will ask Rio, BHP and Brazil's Vale SA for a 35 percent reduction to match the deal agreed to with Australian miner Fortescue Metals Group Ltd., the CISA said Aug. 17.

Aluminum was the biggest contributor to Rio's sales in 2008, accounting for 42 percent, followed by iron ore at 30 percent.

The average price of aluminum for immediate delivery on the London Metal Exchange slumped 53 percent in the first half to $1,213 a ton, from a year earlier, while copper fell 50 percent to $4,067 a ton.

Underlying earnings exclude items such as asset divestments and impairments. The company said in June it won't pay an interim dividend.