(Xinhua)
Updated: 2007-12-05 10:34

China's largest steel manufacturer is "quite likely" to bid for mining giant Rio Tinto, Baosteel Group chairman Xu Lejiang said recently.

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"The bidding plan is now under study and the chances to put forward a bid are very high," Xu was quoted as saying in the 21st Century Business Herald.

Xu told the Guangzhou-based newspaper that the company had not signed any agreement with the London-based Rio Tinto.

"As far as I know, Baosteel has not been in touch with us for such a move," an official with Rio Tinto's representative office in Beijing told Xinhua on condition of anonymity.

Baosteel Group wouldn't comment on its chairman's remarks when Xinhua telephoned the company.

Last month, Rio Tinto refused a proposal by BHP Billiton, the world's biggest diversified miner, to merge. Three of the Australian company's shares were offered for every Rio Tinto share. The share swap was equal to more than US$120 billion. Rio Tinto, however, regarded the offer as far from the true valuation of the company.

The proposed mega-merger would have given the combined mining companies almost 40 percent of the global iron ore market. It would also have given them a bigger voice in the iron ore pricing talks. The industry's other giant is Brazil's CVRD which has a market share of more than 33 percent.

When asked about the purchase price, Xu told the newspaper that the deal would probably surpass US$200 billion.

As the world's largest iron producer, more than 50 percent of country's iron ore relies on importation at present. In addition, more than 95 percent of the iron ore consumed by Baosteel is imported, according to official figures.

In the first three quarters, the country's import volume of iron ore stood at 284.04 million tons, up 14.93 percent from the same period last year, China's Iron and Steel Association said.

Rio Tinto is a leading international mining group that combines Rio Tinto plc, a London-listed public company, and the Australia-listed Rio Tinto Limited with offices in Melbourne.

China Investment Corp (CIC), the country's newly launched state foreign exchange investment company, dispelled market rumors in a statement on November 26. It said that it was not involved in leading a group of Chinese steel makers to bid for Rio Tinto.

On Tuesday, shares of Baoshan Iron and Steel, the Shanghai-listed arm of its parent Baosteel Group, rose 5.22 percent to 15.53 yuan amid the merger hearsay.