Rio Tinto rises on talk of £17bn swoop on Canadian rival

The takeover frenzy in the mining sector fuelled by soaring metal prices looks set to continue with increasing speculation that Rio Tinto, the world's second-largest miner, is poised to launch a £17bn bid for Alcan, the Canadian aluminium producer. Alcan, the world's third-largest maker of primary aluminium behind Alcoa and Russia's Rusal, faces a hostile £15bn bid from its rival Alcoa. Analysts say that if Rio is successful in buying Alcan, it would give it access to two of the world's largest sources of bauxite - its own Weipa deposit and Alcan's Gove deposit, both in Australia - and boost its market position at a time when the price of aluminium is soaring. Bauxite is used to make alumina, then aluminium, a key material in the manufacturing of household products such as drink cans to hi-tech components in aircraft construction. The price of aluminium has rocketed more than 50 per cent in the past two years to more than $2,800 (£1,379) a tonne. Rio has announced plans to step up production in Australia with a £1bn-plus expansion of its refinery in Queensland, which some analysts regarded as a signal it would develop its own resources and not become embroiled in the bid battle. Fuelling the speculation is a filing made by Alcan to the Securities & Exchange Commission, in which the company appears to confirm it is looking at other offers. "Alcan has undertaken negotiations concerning potential strategic transactions and alternatives to the Alcoa offer," it says. However, Rio may not be the only game in town for Alcan. Several other major players will almost certainly have watched the unfolding battle with chequebooks poised, among them Anglo American, Xstrata and BHP Billiton, all known for their pursuit of growth through acquisition. The Brazilian mining company Companhia Vale do Rio Doce has also been tipped as likely to gatecrash the Alcan-Alcoa party. Alcoa launched its hostile bid for Alcan after lengthy, but unsuccessful, discussions between the two companies last autumn. The spate of mega-deals in the sector has been fuelled by the rapacious appetite for raw materials by growing nations such as China and India. Rio Tinto was formed out of a series of acquisitions in the 1990s, and has recently been linked as a likely merger partner for Billiton. Rio closed 88p higher last night at 3993p.