Talk of China move, higher bid lift BHP, Rio shares

By James Regan

SYDNEY (Reuters) - Shares of BHP Billiton Ltd/Plc (BHP.AX: Quote, Profile, Research, Stock Buzz) (BLT.L: Quote, Profile, Research, Stock Buzz) surged to a record high on Wednesday, fuelled by speculation that a state-controlled Chinese firm was building a stake in the world's biggest mining company.

Shares in BHP's bid target Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz) also climbed on continued speculation BHP is about to raise its offer.

Much of the speculation around BHP centered on giant Chinese aluminum maker Chinalco, already the largest shareholder in Rio Tinto Ltd/Plc (RIO.AX: Quote, Profile, Research, Stock Buzz)(RIO.L: Quote, Profile, Research, Stock Buzz) which BHP is seeking to acquire in a hostile, $177 billion all-share offer.

However, one source familiar with the matter said Chinalco had no any imminent plans to take a stake in BHP, and that the speculation was "just talk."

A Chinalco spokeswoman declined comment.

China is largely behind the huge profits that BHP and smaller rivals are generating as its booming economy gobbles up raw materials from iron ore to oil. The latest speculation is the second time in a month that Chinese firms have been named as possible buyers of a stake in BHP.

"There's a lot of rumors. I don't know what to believe," said Tom Elliott, managing director of hedge fund MM&E Capital, noting that Chinalco was mentioned as the Chinese buyer.

BHP Chief Executive Marius Kloppers told CNBC in an interview on Tuesday that he was aware of the rumors but would not comment.  Continued...