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Rio Tinto burnished its defence against the unwanted takeover from BHP Billiton on Wednesday by revealing record-breaking production figures across a range of commodities.
Heralding new highs in iron ore, bauxite, aluminium, alumina, refined gold and copper extracted during the past year, chief executive Tom Albanese said the mining giant was operating "at a record pace" and predicted "an acceleration of this growth in 2008".
Like most announcements by the company since BHP first made its £65 billion ($165.7 billion) all-share offer public in November, the update was interpreted through the lens of its takeover defence, with BHP's put-up-or-shut-up deadline looming just three weeks away.
Of most interest to investors were the iron ore production figures at its massive site at the Pilbara in Western Australia. Helped by the expansion of operations and infrastructure improvements, Rio produced 131.5 million tonnes of iron ore last year, or 9 per cent more than the year before.
Tim Gerrard, an analyst at Austock, said the numbers reinforced the strength of Rio's iron ore business relative to BHP's smaller and less profitable operations there, and supported the target's arguments that it was worth more than BHP had offered.
Predicting that the mining industry's "super-cycle" of sustained high prices would continue, he said that "there is a case to be argued that Rio's iron ore assets may be valued, within three to four years, at the entire market capitalisation of the company".
Gerrard said that BHP would likely have to increase its three-for-one share offer to 3.8 to 1, in addition to a 30 per cent takeover premium.
Marius Kloppers, BHP's head, has thus far refused to budge from the initial terms offered. Albanese has responded by resolutely declining to engage with his counterpart to discuss a deal that would create one of the world's biggest companies.
The Takeover Panel's deadline for a formal offer is February 6.
Ivor Pether of Royal London Asset Management, an investor in both companies, said however that it would be a drawn-out process: "I would be very surprised if [BHP] walk away, but given all the regulatory hurdles they'll have, I don't think they'll need to come in at a level that will get a recommendation right now."
- Independent
