Nov. 26 (Bloomberg) -- Rio Tinto Group, the world's third- largest mining company, will increase its dividend 30 percent and may sell as much as $30 billion of assets in an attempt to repel BHP Billiton Ltd.'s unsolicited offer.

``Rio Tinto has under-promised and over-delivered,'' London-based Rio's Chief Executive Officer Tom Albanese said today on a conference call. ``This has not been appreciated by the market so we need to redress that.''

Rio's rejection of BHP's $128 billion all-share offer as too low has spurred speculation of further bids. The state-owned China Business Journal reported today that China Investment Corp., a $200 billion sovereign wealth fund, is planning an offer. Rio, whose shares have doubled this year, is the world's second-largest supplier of iron ore, used in steelmaking.

``They are trying to defend their turf and ensure they are in a better position for when the eventual discussion takes place for the groups to merge,'' Paul Xiradis, who helps manage about A$13 billion ($11.5 billion) in Australian stocks at Ausbil Dexia, said in Sydney by phone. ``They were very bullish and were not guarded at all given BHP has expressed interest in them.''

Rio dropped 83 pence, or 1.6 percent, to 5,232 pence in London. Earlier today the company's Australian shares gained 7.5 percent amid speculation of a bid from China Investment. BHP declined 27 pence, or 1.7 percent, to 1,541 pence in London.

Trebling Production

BHP CEO Marius Kloppers wants Rio shareholders to pressure management to discuss a combination that would control more than a third of the iron-ore market and supply the most energy coal and copper. BHP has predicted annual savings and revenue gains of $3.7 billion from a merger.

Rio may treble iron-ore production to more than 600 million metric tons a year, Albanese said. Two new mines in Western Australia's Pilbara region will be developed at a cost of $2.4 billion. It would cost about $10 billion to increase output in the region to about 430 million tons, he said in a conference call with reporters. Sam Walsh, the CEO of Rio's iron-ore unit, said today there will be a ``substantial'' increase in iron-ore prices in 2008.

Forecast output from the planned La Granja copper project in Peru could be doubled to 500,000 tons, Rio said. It has also approved spending a further $563 million on the Diavik diamond mine in Canada, with partner Harry Winston Diamond Corp. funding 40 percent of the cost.

Cost Savings

Cost savings from Rio's $38.1 billion acquisition of Alcan Inc. may be $940 million, 50 percent more than expected, Rio also said. The target for the sale of assets prompted by the Alcan purchase has risen to $15 billion from an initial $10 billion estimate. A review found possible assets sales of as much as $30 billion, Rio said. That includes the sale of Alcan's engineered products business, Albanese said.

Other assets that may be for sale include the Cortez gold mine, the Greens Creek zinc, lead and silver mine and the Sweetwater uranium project, all in the U.S. The Northparkes copper and gold deposit and the Kintyre uranium deposit in Australia as well as the talc minerals business may also be sold, Rio said.

Shareholders can then expect a further 20 percent gain in dividends in 2008 and in 2009, Albanese said. The increased dividend is ``a defensive move,'' against BHP, Tobias Woerner, an analyst at MF Global in London, said today in a report.

``The group should have shown its convictions earlier, especially in terms of mergers and acquisitions, and it wouldn't have been in this situation in the first place,'' Woerner said.

Five-Year Rally

The takeover battle offers investors a choice between two newly appointed CEOs who both predict a five-year rally in commodity prices will be sustained. Rio said today that demand for iron ore, copper and aluminum may as much as triple over the next 25 years, driven by expanding economies in China and India.

The majority of Rio and BHP shareholders he had met supported the plan to combine, Kloppers told a press conference in Johannesburg on Nov. 17.

China Investment may be joined in its bid by state-owned steelmakers such as Baosteel Group Corp., Shougang Corp. and Anshan Iron & Steel Group, China Business Journal said today, citing unidentified people.

A CIC press officer denied the report, and said it will release an official statement soon. Spokesmen for the steelmakers said they were unaware of any proposal.

``We've been listening, but have not engaged'' with other companies, Albanese said. He has ``not seriously considered'' a counter-bid for BHP.

Brazil's Cia. Vale do Rio Doce is the world's largest iron-ore supplier.

To contact the reporters on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net; Brett Foley in London at bfoley8@bloomberg.net

Last Updated: November 26, 2007 13:54 EST