BHP chief talks Rio value, steelmakers howl

By Kang Shinhye and Marie-France Han

SEOUL (Reuters) - The head of the world's biggest mining group, BHP Billiton Ltd (BHP.AX), pushed his case for a mega-merger with rival Rio Tinto (RIO.AX) on Tuesday in the face of growing opposition from big Asian customers.

Rio Tinto Ltd/Plc (RIO.L), meanwhile, was considering offering joint ventures with BHP as an alternative to its bigger rival's takeover offer, Britain's Daily Telegraph newspaper said.

Without citing sources, the paper said in its online edition that Rio was preparing a preliminary defense plan -- Project Manchester -- against BHP's proposed three-shares-for-one bid.

Rio Tinto declined to comment on the report.

"We think this is a good proposal for shareholders and customers, but we have a lot of work to go through," BHP (BLT.L) CEO Marius Kloppers told Reuters on his way into talks with POSCO (005490.KS), the world's fourth-biggest steel maker, in the South Korean capital.

Kloppers has said a merger could mean $3.7 billion in annual savings after seven years through synergies in iron ore, coal and other activities.

"We think the overlap of the operations, the fact that we have a solution on how to put the companies together, and the benefits ... is a very good proposition," he said on Tuesday.

"We have a very compelling value proposition."

BHP said on November 8 it had approached third-ranked miner Rio with an all-paper offer, now valued at around $122 billion. Rio was quick to reject the approach as too low.

A BHP/Rio tie-up would create the world's biggest mining force, with control of huge amounts of iron ore, copper, coal, uranium, diamonds and other commodities for industrial use.

Industry officials have said a merged entity would control 40 percent of the world's iron ore seaborne trade and 60 percent of Japan's iron ore imports. Japanese steelmakers said on Monday they strongly oppose a merger.

That global clout could drive up costs for Asian steel firms as consolidation would reduce their bargaining power over long-term supply contracts for iron ore.

BHP shares in London dipped 0.8 percent to 1,507 pence while Rio shares shed 0.9 percent to 5,009 pence by 1150 GMT, underperforming a flat UK mining index .FTNMX1770.

CHINESE CONCERN

China's steel industry, the biggest in the world, is concerned a merger would create "an even bigger monopoly" in iron ore, the industry's main feedstock, the China Metallurgical News quoted an unnamed senior official of the China Iron and Steel Association as saying.