Rio calls investors to defence amid new talk of China bid

Mining giant Rio Tinto today contacted shareholders directly to hit back at rival BHP Billiton's hostile approach amid renewed speculation of a Chinese-backed counterbid.

In a letter to shareholders, chairman Paul Skinner stressed Rio's growth plans for iron-ore and copper mining and for aluminium production.

"Together these are positioned to capture strong growth in demand in the developing economies, including China and India," Skinner said.

BHP has until 6 January to come up with a bid for Rio or leave the field after a Takeover Panel "put up or shut up" ruling. Rio has refused all overtures to talk about BHP's three-for-one share offer, which the company says undervalues its prospects.

Reports in Hong Kong said that Beijing has agreed to major state-owned corporates looking into three strategies for mounting counterbids for Rio. The strategies under consideration are forming a domestic consortium; local players working in concert with foreign companies; or buying shares on the open market.

Investment group Blackstone this month refuted media reports that it was planning a bid for Rio with a consortium believed to include China's $200 billion (£100.1 billion) sovereign wealth fund.

Rio has already promised to pay a 30% higher dividend this year, and not less than 20% more in each of the following two years.

In attempts to get Rio to the negotiating table, BHP chief executive Marius Kloppers has been promoting what he calls "compelling synergies" in a tie-up. BHP has said a marriage would generate $3.7 billion in benefits after seven years, and has pledged to buy back $30 billion in shares if the deal goes through.