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BHP Billiton CEO argues Rio Tinto merger brings benefits for all shareholders

SYDNEY - BHP Billiton's chief executive Marius Kloppers reiterated his view on Thursday that the top miner's proposal to take over third-ranked Rio Tinto would bring benefits for both sets of shareholders.

'If our takeover of Rio Tinto is successful, and I believe it will be, the combination will create even greater value for shareholders,'' Kloppers told the Melbourne Mining Club on Thursday.

BHP Billiton's hostile 3.4-for-1 paper offer, valuing Rio Tinto at about $170 billion, is now before the European Commission, the European Union's antitrust regulator, as part of the regulatory process it needs to go through.

The commission has until July 4 to decide on the offer or begin a five-month period of considering the offer in more detail.

BHP also has to clear regulatory hurdles in Australia, South Africa and the U.S. before it can put its proposal to Rio Tinto shareholders.

In his address Kloppers again emphasised what he views as BHP's superior growth profile to that of Rio Tinto, arguing that BHP's growth would come from some of its highest-margin businesses and projects with lower risk because they involved expansions of existing mines.

'Much of our growth is focused on the highest margin businesses in which we have a clear advantage,' Kloppers said.

BHP is targeting 6.9 percent production growth over the next five years which is lower than Rio Tinto's forecast of 8.6 percent annual output growth out to 2015.

Kloppers also said the company was planning 'several phases'' of expansion to its Olympic Dam in South Australia to increase copper output to 730,000 tonnes per year and uranium production to 19,000 tonnes per year.

'We haven't taken any investment decisions. We will give an update in the fourth quarter,' he said.

Kloppers said increased output across BHP's suite of products was needed to meet rising demand for raw materials from emerging economies and particularly China.

'China is undergoing an industrialization process and a massive urbanization process at the same time -- the rapid and fundamental development in China mean the full range of minerals and energy products are needed to drive this growth,' he said.

Kloppers also denied recent speculation that BHP had held talks with potential Chinese investors about an equity alliance involving Chinese interests taking a stake in BHP.

'We would have disclosed if we had -- I have no further information on this,' he said.

China's state-backed aluminium giant Chinalco in February gained a 9 percent stake in Rio Tinto in a joint share raid with Alcoa Inc.

That move was seen partly as an attempt to derail BHP's bid for the miner as Chinese steel mills fear a merged group would have too much pricing power in the global iron ore market.

Meanwhile, BHP Billion said it has lifted a force majeure on its Queensland coal mines which had been in force since January because of flooding at mine sites.

It said its equity coal production loss from flooding at BHP Mitsubishi and BHP Mitsui operations in the state was estimated to be at the upper end of the 3.7-4.6 million tonnes range estimated on Feb. 25.

BHP said delivery delays for some of the 2007 contracts meant about 1.4 million tonnes of coal in the first quarter of the next financial year starting July 1 would be delivered at lower 2007 contract prices, rather than the higher prices achieved for the year starting April 1.

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