Shares of BHP BillitonLtd/Plc surged to a record high on Wednesday,fuelled by speculation that a state-controlled Chinese firm was building astake in the world's biggest mining company.

Much of the speculationcentred on giant Chinese aluminium maker Chinalco, already the largestshareholder in Rio Tinto Ltd/Plc , which BHP isseeking to acquire in a hostile, $177 billion all-share offer.

China is largely behind the huge profits that BHP andsmaller rivals are generating as its booming economy gobbles up raw materialsfrom iron ore to oil. The latest speculation is the second time in a month thatChinese firms have been named as possible buyers of a stake in BHP.

There's a lot ofrumours. I don't know what to believe, said Tom Elliott, managingdirector of hedge fund MM&E Capital, noting that Chinalco was mentioned asthe Chinese buyer.

A Chinalco spokeswomandeclined comment.

BHP's chief executive,Marius Kloppers told CNBC in an interview on Tuesday that he was aware of therumours but would not comment.

It's very difficultfor us to make specific statements but certainly we've heard the same rumoursover the last couple of days as you have, Kloppers said.

Earlier this month Klopperssaid he was certain Chinese entities would eventually own part of BHP.

BHP rose nearly 7 percentto a record A$48.90 a share and ended 6 percent higher at A$48.56 in aboveaverage volume, its biggest one-day gain since Jan. 23.

The latest rumourssuggested the Chinese buyer or buyers were aiming to accumulate a 10 percentstake in London, possibly at the equivalent of A$53 a share. That wouldwork out to about 2572 pence, or a 27 percent premium to BHP Billiton's lasttrade.

Chinese companies havestepped up investment in Australian miners as they search for stable suppliesof iron ore, coal, nickel and other industrial staples in short supply at home.In February, Chinalco paid $14 billion for 9.3 percent of Rio Tinto.


If they're going tohave to pay high prices for commodities ... it probably makes sense to ownequity interests in the companies that produce those commodities, because theyat least share in the benefit of those high prices, Tim Barker, ananalyst with BT Investment Management said.

BHP's bid for Rio, which Kloppers sees as a way tocreate a super efficient mining house, has also galvanised Chinese companies,who fear a combined entity would have too much sway over pricing.

China sees its modern-day industrial revolution lastingdecades, prompting it to take a longer view of metals prices and to spendsooner rather than later on securing steady supplies, according to analysts.

I'm just reallysurprised that the Chinese didn't do this three years ago, said AdnanKucukalic, equity strategist at Credit Suisse First Boston.

Australia has warned other countries it willscrutinise moves by state-owned entities to buy shares in BHP to make sureAustralian interests were not threatened by a sale.

In the CNBC interview,Kloppers also would not rule out adding cash to its offer to win support from Rio's shareholders. BHP is offering 3.4of its shares for every share in rival Rio Tinto Ltd/Plc .

However, Kloppers saidcommodity price movements had made the offer more attractive recently.

Since we made our bidI think oil prices have moved up substantially, other commodity prices which wehave in our portfolio moved up substantially and since we are paying with ourscrip, this means that the value of our offer has effectively increased,he said. (Additional reporting by Geraldine Chua and Ben Wilson in SYDNEY, Sonali Paul in MELBOURNE and Lucy Hornby in BEIJING) (Editing by Kim Coghill)

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