Rio plans to spend as suitors circle

Rio Tinto (RTP-N, RIO-L) plans to get stronger and thwart BHP Billitons (BHP-N, BLT-L) hostile takeover the old-fashioned way through organic growth.

Rio says it will spend US$563 million to further develop the Diavik diamond mine in the North West Territories and ramp up iron-ore production.

Rio has a 60% stake in Diavik, with Toronto-based Harry Winston Diamond (HW-T, HWD-N) taking up the remaining share. The two companies say the money is going towards developing an underground mining phase at the mine that would yield diamonds by 2009 and continue beyond 2020.

Additionally Rio says it will ramp-up iron ore production to 600 million tonnes a year and pump US$2.4 billion into getting two iron ore deposits in Western Australia into production.

The announcement comes on the heels of the London-based mining giants rejection of BHPs US$150-billion takeover bid.

The offer, says Rios Chief executive Tom Albanese in a statement, doesnt reflect the full value of Rios company’s current assets or its project pipeline which Albanese says is better than Rios competitors.

Talk has also surfaced from China that a consortium of China Investment, Shanghai-based Baosteel Group, and other smaller steel companies, were readying to make a US$200-billion for Rio Tinto.

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