Rio Tinto's selling, but who's buying?

By Joseph Chaney and Denny Thomas

HONG KONG/SYDNEY (Reuters) - Mining giant Rio Tinto is hiving off assets to pay down $40 billion in debt after BHP Billiton withdrew a $66 billion (43 billion pound) bid, but in these turbulent times, who's buying?

Bankers and analysts say the world's largest miner BHP, Brazil's Vale, Switzerland's Xstrata Plc and China's aluminium giant Chinalco, parent of Chalco, are all eyeing Rio's diverse collection of assets.

Most have the cash to pounce on any near-term opportunities.

"The two with the most cash, BHP and Vale, they're definitely looking at the situation," one Hong Kong-based resources banker at a Wall Street firm told Reuters.

"Xstrata is still highly leveraged. Its stock has taken a beating -- it'd be interested, but has less ability to do a big deal," the banker said.

Neil Goodwill, analyst at Goldman Sachs JBWere, reckons the premise behind a BHP/Rio deal highlighted the strategic benefit of combining the two firms' iron ore assets in Australia's Pilbara region, and Rio should look to capture those benefits.

"For BHP, operating the assets, we believe, would be a must; for Rio, extracting cash for a 50/50 joint venture may ease its current debt position," Goodwill wrote in a report.

"We believe this deal could add significant value for both shareholders and solve some of Rio's pressing debt issues."