Rio Tinto shares rise after China stake

By James Regan

SYDNEY (Reuters) - Shares in miner Rio Tinto Ltd rose nearly 5 percent on Monday as investors reckoned the purchase by China and U.S. aluminium producer Alcoa of a $14 billion stake in Rio ratcheted up the pressure on BHP Billiton Ltd to sweeten its own offer for Rio.

The purchase by state-owned Aluminum Corp of China (Chinalco) and Alcoa comes ahead of a UK regulator's Wednesday deadline for BHP to pitch a formal offer for Rio. But fund managers said a deal still hinged on BHP's willingness to proceed.

"It makes it more complicated for BHP, but it doesn't mean there's another bidder there. It really looks like these guys just want a seat at the table, maybe some assets," said Steve Robinson, a portfolio manager with Alleron Asset Management.

Rio stock gained 4.8 percent in early trading before easing back to stand up 1.1 percent at A$128.71 by 0314 GMT.

Chinalco President Xiao Yaqing has scheduled a media conference in Sydney for 0430 GMT to discuss the reasons behind buying the Rio stock. BHP was up 2.8 percent at A$39.60.

The move by Chinalco, one of China's big state-owned companies, comes as Beijing shows signs it may be ready to flex more of its financial muscle overseas after being pumped up by years of economic growth at home.

China Investment Corp, a sovereign wealth funds holding around $200 billion, and China Shenhua Group, a coal miner, were in talks to buy a 15.85 percent stake in Australia's Fortescue Metals Group Ltd for about US$2 billion, according to the South China Morning Post.

Fortescue would only say it was holding a number of talks with interested parties and that nothing had been concluded.