Mining giant Rio Tinto, the target of an unwanted $174 billion (£88 billion) takeover bid from rival BHP Billiton, today pledged to reduce its borrowing over the next two years.

Chairman Paul Skinner, speaking at the company's annual general meeting in Australia, said planned asset sales and strong cashflow will "draw our debt down to much more comfortable and traditional levels".

He added: "That should not be a matter of concern."

Rio's debt rose to about $45 billion after the company bought Canadian aluminium producer Alcan for $38.1 billion last year.

It has about $15 billion of loans due in October which may be extended for a year, chief executive Tom Albanese said last month, and is benefiting from a decline in interest rates.

Skinner reiterated that the board had rejected the BHP Billiton bid because it "significantly undervalued" the company's assets and prospects.

"The board will not engage in discussion with any party whose proposals do not fully value Rio Tinto," he told shareholders. He said this position was underscored by the decision of Aluminum Corporation of China (Chinalco) to team up with Alcoa in February to take a 9% stake in the company.

BHP's tilt at Rio Tinto was given a fillip yesterday by strong production results, with the company stepping up the war of words against Rio.