BHP chief says no reason to add cash to Rio offer

SYDNEY: Top miner BHP Billiton's chief executive on Thursday ruled out adding a cash sweetener to its all-share $69 billion (41 billion pound) offer for rival Rio Tinto , saying financial turmoil hitting commodity markets was no reason to change. There has been market speculation BHP might try and win over Rio's board, which has rejected the overture, by adding cash to its offer of 3.4 of its shares for every Rio share. "Our offer is very compelling the way it is," Marius Kloppers said, answering questions following a speech in Sydney. "Joining these companies together means more production at lower costs." Some analysts also said deterioration in the value of offer to about half the original price, leading to Rio shares trading at a significant discount, was also an argument for adding cash. But Kloppers blamed the sharper decline in Rio's share price, which has dropped 43 percent since last November, on a "flux" in the market over the outcome of the bid. BHP's stock is down about 37 percent over the same period. Rio Chief Executive Tom Albanese said on Tuesday in Montreal that current market conditions had not softened his opposition to the offer. World prices for the millions of tonnes of mineral commodities both companies churn out have collapsed amid concerns of mounting supply gluts. Since July, aluminium has lost 31 percent of its value, copper is down 47 percent and nickel sells for 38 percent less. After six straight years of iron ore price increases, analysts now predict next year's ore price will be flat at best. Kloppers also predicted a recent decline in China's hunger for imported raw materials was only temporary. While Chinese demand for imported copper, iron ore and other industrial staples was not strong enough to offset sharp declines in consumption elsewhere in the world, "we expect China to be resilient, with an imperative to grow," Kloppers said. BHP rose 8.7 percent at A$28.59 (11.80 pounds) in late trading. Rio rose about the same to A$76.93, outpacing gains in the wider S&P/ASX200 index. ---reuters