UPDATE 1-Rio Tinto says China authorities detain four staff

(Adds details, background)

LONDON, July 7 (Reuters) - Four employees of global mining giant Rio Tinto RIO.LRIO.AX in Shanghai have been detained by Chinese authorities, the firm said on Tuesday.

Rio, which last month scrapped a $19.5 billion deal with Chinese state-owned metals group Chinalco, said it was unclear why the employees were detained on Sunday.

“It appears four employees from Rio Tinto’s Shanghai office have been detained for questioning by the Chinese authorities,” spokesman Nick Cobban said.

“We haven’t been able to make contact with them since and we’ve asked the Chinese authorities for an explanation and we’re haven’t received anything from them.”

Three of the four being detained by the Public Security Bureau are Chinese citizens, the Sydney Morning Herald newspaper reported.

The fourth is an Australian passport holder, it said, citing a government source, and said the Australian government is demanding that Beijing grant consular access.

Rio’s Cobhan said the Shanghai office is mainly a sales and marketing office for Rio, the world’s second biggest iron ore producer, which is listed in London and Sydney.

“Obviously China is a very big market for us particularly in terms of iron ore, so we have quite a significant presence in China.” He declined to give the employees’ names or nationalities.

“Rio Tinto intends to co-operate fully with any investigation the Chinese authorities may wish to undertake and has sought clarification on what has occurred,” the company said in a statement.

On June 5, Rio announced it had dumped plans for a landmark investment from Chinalco and instead decided to seal an iron ore joint venture with rival BHP Billiton BHP.AXBLT.L. [ID:nSYD73514]

Several days later, China’s official Xinhua news agency slammed Rio Tinto’s “perfidy” for scrapping the deal. [ID:nPEK180004]

Rio has been locked in difficult talks with China’s huge steel sector, the biggest customer for Rio’s iron ore. Rio has refused to give in to Chinese demands for a bigger cut in contract prices and has been shipping material on the spot market. [ID:nSP525100] (Reporting by Pratima Desai and Eric Onstad; editing by Anthony Barker and Jason Neely)