Rio ups the ante with call for higher bid from BHP

The valuation gap between BHP Billiton's £75bn hostile offer for rival Rio Tinto and what the latter would be willing to accept is widening and will now only be rescued by a vastly improved bid, Rio's chief executive said.

Speaking on the publication of Rio's quarterly production figures, Rio's head Tom Albanese said: "The gap is continuing to widen, now and in the future. We are continuing to pull ahead. We are growing at twice the rate that BHP is."

Mr Albanese's heady proclamation came despite the publication of first-quarter numbers that showed falls in several key products. Blaming seasonal cyclones and rains in Australia, Rio's production of copper, coking coal and iron ore fell in the first three months of the year. Several analysts labelled the production figures "mixed".

Nonetheless, Mr Albanese said that Rio can unequivocally show that up to 2015, it will grow at twice the rate of BHP – 8 per cent volume growth versus 4 per cent for BHP. BHP has argued that if Rio's share of an array of joint ventures is stripped out, the growth profile changes substantially.

The latest flare-up came amid growing speculation in the Australian press that China may be readying a raid on BHP shares. Chinalco, the state-owned aluminium company, shocked the market this year when it bought 9 per cent of Rio.

As the largest customer of both companies, China has an interest in seeing BHP's bid fail. If it bought a major stake in BHP, it would have an even greater say in the outcome of its bid to forge the world's first mining super-major. BHP will make its first submissions to answer the European Commission's anti-trust concerns within weeks.

The importance of the mining groups to China was underlined yesterday by the revelation that China's GDP has grown by 10.6 per cent so far this year, showing virtually no ill-effects of the credit crunch and consumer slowdown that are rapidly slowing the US and European economies. The numbers give added support to the contentions of both groups that China has largely "decoupled" from America and that it can continue to grow strongly despite troubles in the world's largest economy.

BHP has already increased its all-share offer once. Under the new deal, Rio shareholders would end up with 44 per cent of the company, up from 36 per cent under the initial proposal.