Rio shares tumble as BHP fails to increase its offer

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The shares slumped nearly 8% in trading in Australia, reversing Friday's gains. Its London-listed stock fell 321p to 4379p.

While the timing may have disappointed investors, it is looking increasingly likely that BHP will launch a hostile bid for Rio before the 6 February deadline to "put up or shut up" under a Takeover Panel ruling.

BHP continues to defend its £60 billion three-for-one share offer, but may have to sweeten that, with Rio's chief executive Tom Albanese describing it as "two ball parks" away.

BHP is understood to have tapped banks including Barclays, UBS, Goldman Sachs, HSBC, BNP Paribas and Santander to finance the deal.

Rio chief executive Tom Albanese, asked on Sky News in Australia today if he expected a revised bid from BHP soon, appeared to leave the way open to accepting an improved offer. He said: "It's all about value. If the value's not there, it's not there. If it is there, it is there."

Albanese continued his defence that Rio had strong future prospects not factored into BHP's pricing, saying: "The markets are good. We see a multi-decade demand outlook in India, in China."

BHP would not comment. A combined company would control a third of the world's iron-ore market and produce more energy coal, copper and aluminum than any rivals. London-based Rio is the world's third-largest miner.