Rio May Sell $30 Billion of Assets, Boost Dividends

Rio Tinto Ltd., the world's third- largest mining company, will boost dividends 30 percent and has identified a possible $30 billion of asset sales as it battles an unsolicited takeover approach from BHP Billiton Ltd.

``The value in Rio Tinto is yet to be fully reflected by the market,'' London-based Rio Tinto's Chief Executive Officer Tom Albanese said in briefing notes to analysts today. ``We have a better growth pipeline than our competitors.''

Rio's rejection of BHP's $128 billion all-share offer as being too low has spurred speculation of further bids, including from China's sovereign wealth fund. Rio, whose London stock has gained 23 percent since the Nov. 8 approach, hasn't spoken with other potential suitors, Albanese said on a conference call.

``They are trying to defend their turf and ensure they are in a better position for when the eventual discussion takes place for the groups to merge,'' Paul Xiradis, who helps manage about A$13 billion ($11.5 million) in Australian stocks at Ausbil Dexia, said in Sydney by phone. ``They were very bullish and were not guarded at all given BHP has expressed interest in them.''

Melbourne-based BHP has fallen 11 percent in Sydney since announcing its bid. Rio rose by A$9.60, or 7.5 percent to A$138.00 at the 4:10 p.m. Sydney time close on the Australian Stock Exchange, amid speculation of a bid from China Investment Corp. BHP rose by A$1.84, or 4.5 percent, to A$42.11.

BHP's Chief Executive Officer Marius Kloppers wants Rio shareholders to pressure management to discuss a combination that would control more than a third of the iron-ore market and supply the most energy coal and copper. BHP has predicted annual savings and revenue gains of $3.7 billion from a merger.

Trebling Production

Rio may treble iron ore production to more than 600 million metric tons a year, Albanese said in the notes sent to the exchange. Two new mines in Western Australia's Pilbara region will be developed at a cost of $2.4 billion. It would cost about $10 billion to increase output in the region to about 430 million tons a year, he said on a conference call with journalists.

Forecast output from the planned La Granja copper project in Peru could be doubled, the statement said . Rio has also approved spending a further $563 million on the Diavik diamond mine in Canada, with partner Harry Winston Diamond Corp. funding 40 percent of the cost.

Cost savings from Rio's $38.1 billion acquisition of Alcan Inc. may be $940 million, 50 percent more than expected, the statement said. The target for the sale of assets prompted by the Alcan purchase has risen to $15 billion from an initial $10 billion estimate, it said. A review found possible assets sales of as much as $30 billion, it said.

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