BHP shares at record on China stake talk

By James Regan and Sonali Paul

SYDNEY/MELBOURNE (Reuters) - Shares in BHP Billiton, the world's largest miner, rose more than 4 percent to a record on Friday amid fresh speculation that Chinese interests were looking to build a stake in the group.

BHP said it would not comment on a report in The Australian newspaper that Chinese interests have asked a big Australian pension and investment fund to be a partner in a multi-billion dollar swoop on 9 percent of BHP's shares.

The rise in BHP's shares stretched to 8.5 percent the discount of Rio Tinto Ltd/Plc shares to the implied value of BHP's hostile 3.4-shares-for-one offer.

"Even if the Chinese come in and buy up a lot of BHP shares, that's doesn't mean they are going to want the whole company," said a mining analyst, who asked not to be named as he is not authorised to talk to the media. "The discount suggests there's no immediate counter offer in the works."

China opposes the idea of a merged BHP/Rio, fearing it would create a mining giant with too much clout in negotiating prices of raw materials such as iron ore that are key to China's rapid industrialisation.

Chinese aluminium maker Chinalco spent $14 billion (7.2 billion pounds) in February to snap up a 9.3 percent stake in Rio, and BHP shares have risen this week amid talk that Chinalco was conducting a bookbuild of BHP shares.

Under the terms of the approach reported by The Australian, the Chinese would take 4.5 percent of BHP Billiton, with the Australian fund and a global private equity investor splitting the remaining 4.5 percent stake.

The report did not name the Chinese entities or the fund.