BHP believes Rio's China deal will go ahead, says broker

Some interesting snippets from analysts at Killik & Co after a meeting with mining group BHP Billiton yesterday. The company seemed upbeat on trading despite recent falls in commodity prices, and generates enough cash to keep paying a progressive dividend, according to Killik. The broker has a buy recommendation on the business, saying it was a low risk way to play a recovery in the commodity market. Of particular interest, however, was BHP's view of the controverisal $19.5bn investment by Chinalco in rival Rio Tinto (BHP, of course, made an audacious bid for Rio but was forced to abandon it in November as the global economy headed south). Over to Killik: "We were interested to hear Billiton's view on the Rio Tinto/Chinalco deal. Management think the deal will go ahead - they don't see Rio shareholders providing much opposition and don't see any legal reason why Chinalco can't increase its stake. Billiton believes the deal has the potential to change the dynamics of the industry and, in particular, transparency of pricing and contracts. It believes the price of the assets in which Chinalco is taking a minority stake has been struck at a level to prevent Billiton intervening with a bid of its own." At the moment BHP is 22p better at ?14.27 while Rio has risen 44p to ?20.23. Overall the market has moved into positive territory after a bright start on Wall Street. With the Dow Jones Industrial Average up around 30 points, the FTSE 100 has moved 20.87 points higher to 3837.80.