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BHP Pushes Mines Hard as Rio Offer Deadline Looms

BHP Billiton, looking to win support for a takeover of rival Rio Tinto, said growth in production of key commodities such as copper and iron ore accelerated in the three months to December.

CNBC.com

The number of tons BHP yielded from its operations in 25 countries was mostly in line with expectations among analysts, who see the world's biggest mining house reaping a $7 billion-plus net profit for its fiscal first half.

Rio , which is fighting the approach from BHP and also racing to capture more of the global commodities boom, said earlier this month it had churned out all-time high tonnages of iron ore, copper and other industrial minerals in 2007, putting pressure on BHP to make a strong showing.

BHP said copper production rose 16 percent and iron ore was up 9 percent in the second quarter versus a year ago, while production of manganese, oil, lead, coal and uranium all showed stronger production growth in the second quarter compared with the previous quarter's performance.

"This will give them a very strong lead into 2008," mining analyst Gavin Wendt of Fat Prophets in Sydney said.

Much of BHP's argument for a tie-up lies in both companies' Australian iron ore and coal mines, which control of millions of tons of ore vital to steel making.

"We have broad exposure to the steel-making sector through our iron ore, manganese and metallurgical coal operations and achieved record shipments in all these commodities," BHP said in its latest quarterly production report.

Rio has rejected the three-for-one share-swap proposal, worth some $139 billion when announced in November, plus the promise of a $30 billion share buyback, saying it is happy to ride the boom in mineral commodities on its own, earmarking billions of dollars to dig new mines.

More Lead Production

BHP stock was trading 1.6 percent lower, while Rio was down 2.2 percent, after sharp losses in the previous session.

DJ Carmichael & Co mining analyst James Wilson in Perth said BHP may have to increase its offer if it hopes to gain the blessing of Rio's board. "The proposal out there now doesn't reflect Rio's growth potential, particularly in iron ore," Wilson said.

Market speculation swirled last week that BHP was either unwilling to budge on its terms or was readying a new offer of 3.58 of it shares and A$16.50 in cash for each Rio share.

Both companies have declined to comment. BHP must launch a formal offer by Feb. 6 or walk away for at least six months to abide by a ruling by Britain's Takeover Panel.

BHP's output of lead, trading at record high prices recently, galloped 92 percent higher and crude oil and condensate output rose 12 percent in the quarter ended Dec. 31, versus the corresponding period a year earlier.

However, aluminum turned in a flat performance in the quarter, while nickel production dropped 9 percent, reflecting planned maintenance work at smelters and refineries in Australia and Colombia, BHP said.

Nickel, used in the manufacture of stainless steel, saw prices soar to above $50,000 on the LME in 2007 on the back of low stocks and short supplies, but has nearly halved since then to trade at around $27,900 a ton on Wednesday.

Diamond production was also hampered as operations shifted from open pit mining to underground mining in Canada, causing a 10 percent drop during the quarter, BHP said.

Output from the petroleum division in the quarter and first half was at record levels thanks to the start up of its Atlantis and Genghis Khan oil fields in the United States.