Oct. 16 (Bloomberg) -- BHP Billiton Ltd., the world’s biggest mining company, agreed to buy United Minerals Corp. for A$204 million ($188 million), countering a bid by China to take a stake in the iron ore explorer.

BHP agreed to pay A$1.30 a share, 43 percent more than United’s last traded price, the Perth-based company said today in a statement. The bid is conditional on China Railway Materials Commercial Corp. not completing the purchase of an 11.4 percent stake in United announced last month.

United gives Melbourne-based BHP a resource of 158 million metric tons of iron ore located next to its Mining Area C project in Western Australia’s Pilbara region as well as land located close to railroads owned by BHP and its potential joint venture partner Rio Tinto Group. China Railway is one of the three largest steel buyers in China, United said last month.

“It’s a strategic acquisition to improve the logistics around their own production process,” Prasad Patkar, who helps manage $1.2 billion at Platypus Asset Management in Sydney including BHP shares, said today. Production efficiencies mean “the premium won’t matter because the payoff could be a multiple of the dollar value of investment,” he said.

United rose 40 percent to A$1.27 at the 4:10 p.m. close of trade in Sydney. BHP added 0.8 percent to A$39.20. State-owned China Railway had agreed on Sept. 8 to buy 20 million new shares in United at A$1.35 each.

‘Logical Owner’

BHP “is the logical owner and developer of the Railway deposit given the proximity to BHP Billiton’s iron ore deposits, and established mine and rail,” Ian Ashby, the company’s iron ore president, said today in a statement.

United paid A$1 million in cash and stock when it acquired three mineral tenements, including the Railway deposit, from DFD Rhodes Pty Ltd. in 2006.

“When we acquired the iron ore project three years ago, the company was valued at around A$20 million,” United Chairman Alan Birchmore said in the statement. “The BHP Billiton proposal now values the discovery and the company at over A$200 million. By any measurement this is a great result.”

UBS AG is advising United Minerals and Gresham Advisory Partners is assisting BHP. The companies have agreed to break fees, BHP said.

To contact the reporter for this story: Jesse Riseborough in Canberra at jriseborough@bloomberg.net

Last Updated: October 16, 2009 01:22 EDT