Rio Tinto says BHP rejection on value

Rio Tinto said it rejected BHP Billiton’s BHP.L $147 bln (73.4 bln pounds) takeover offer, aimed at assembling a super mining house, on value only, but warned that mining companies could run the risk of becoming too big.

“We rejected BHP’s proposal strictly on the basis of value,” Rio Tinto chief executive Tom Albanese told reporters on Wednesday, adding that at some point miners run the risk of losing efficiency gains if they enlarge too greatly.

Albanese reiterated Rio‘s stance that its growth prospects in a range of mineral commodities including aluminium, copper and iron ore were strong as an independent company.

Albanese said he saw growth opportunities in future partnerships with Chinese companies, both within China‘s domestic market and in other regions, such as Africa.

State run Chinese Aluminium group Chinalco last month took a $14 bln stake in Rio Tinto but said it was not planning its own takeover.

Continued strong growth in Chinese demand for imported minerals would help offset any downturn in U.S. markets brought on by the mounting financial crisis, Albanese said.

BHP announced a pre-conditional takeover offer for Rio on February 6 of 3.4 of its shares for each Rio share, worth $147.4 bln at the time. Rio‘s board immediately rejected the offer.

Rio, BHP and other mining houses have largely pinned future earnings growth on China‘s economic growth, given its standing as the world’s top importer of iron ore, copper and other minerals and metals.

Albanese said Rio would continue with a push to extract a premium for its iron ore exports to reflect the lower freight costs to Asia from Australia than from Brazil, the world’s other main exporter.

The move by Rio and BHP has angered the Chinese government.

Rio, which has bigger aluminium and iron ore divisions than BHP, saw its underlying earnings in 2007 rise to a record $7.443 bln. Underlying earnings are forecast to climb to around $10.8 bln this year, according to Reuters Estimates.

Combined, BHP and Rio would create the world’s third-richest company, with a market capitalisation eclipsed only by Exxon Mobil and General Electric.