Some Australian shareholders are believed to be pressing Rio Tinto to start talks with BHP Billiton, the rival mining company which is mounting a hostile takeover. Rio Tuesday refused to knock down the speculation as its chairman Paul Skinner said: “We have got a variety of responses from a variety of investors.”

Rio has had no dialogue with its rival since the first offer was made at the beginning of November.
Rio again dismissed BHP’s offer of 3.4 shares for each Rio share, which amounts to £75 billion ($146 billion), as undervaluing the business. Its rejection came as Rio saw full-year profits fall two percent to $7.31 billion last year as the mining company faced difficult currency exchange rates and higher energy and freight costs.
But, as it pledged last November following the takeover approach, Rio increased its dividend for last year by 31 percent to 136 U.S. cents and promised that dividends for this year and next year would rise by at least 20 percent. The move will cost it $1.75 billion for last year, $2.1 billion for this year and $2.5 billion for next year. The company stressed that it was focused on returning value to shareholders.
The tougher mining trading conditions offset higher prices for its core products of copper, iron ore and coal. But the world’s second biggest miner said it expected prices to remain strong in the future. Paul Skinner, chairman, said: “With supply-side constraints across the mining industry unlikely to ease in the near future, commodity prices are expected to stay high by historical standards in 2008 and well beyond.”
Tom Albanese, the company’s chief executive, said that Rio would be shielded from much of the impact of a recession in the U.S., should that occur, because its main driver was China. He said: “China has replaced the U.S. as the dominant consumer of all we produce and China’s growth is largely driven by domestic factors. A U.S. recession, if it were to happen, would have a very limited effect on China. It would be less than one percent of the rate of growth of Chinese GDP.”
Skinner said that the stake in Rio recently taken by China’s Chinalco and Alcoa reflected the value in the business. He brushed aside fears over having Alcoa, a key rival, as an investor. He said that Alcoa’s interest was diluted and neither it nor its Chinese partner had expressed an interest of having a seat on the board.
Rio has embarked on a program to sell $15 billion of assets to streamline the company after its $38 billion acquisition of Alcan, the aluminum producer, last year. It has appointed bankers for all the disposals and said they were going well.
(Source: The Times)