Rio rebuffs BHP, outlines growth plans

By James Regan

SYDNEY (Reuters) - Rio Tinto Ltd/Plc will spend $2.4 billion on new mines, raise its dividend and generate billions of dollars from asset sales as it seeks to fend off a $120 billion takeover proposal from larger rival BHP Billiton Ltd.

"While BHP may need Rio Tinto, Rio Tinto doesn't necessarily need BHP," Rio Chief Executive Tom Albanese told a media teleconference from London on Monday.

"We believe that the value in Rio Tinto is yet to be fully reflected by the market. We have the people, execution capability and resources to work smarter, faster and better than our competitors."

BHP made public on November 8 its plan to take over Rio and forge a mega-mining group with a market capitalization of around $350 billion and control of much of the world's iron ore, copper and aluminum.

Albanese reaffirmed that he thought BHP's bid fundamentally undervalued Rio, which he said was better placed to deliver value as a stand-alone firm.

"It's fair to say that every conversation I've had, is they (Rio shareholders) are happy to reject the proposal," he told a London news conference following a presentation.

Albanese said that with two new iron ore mines in Australia, total production should double to around 430 million tonnes by 2018. Rio would also shoulder more than half the cost of a more than half a billion dollar diamond mine expansion in Canada.

"It's very clear that one of their key strategies is to pump up the iron ore volume as much as possible, which increases the competition issues," said an analyst in Johannesburg who declined to be named.