May 13 (Bloomberg) -- Rio Tinto Group, the third-largest mining company, rose in London trading on speculation BHP Billiton Ltd. will increase its $179 billion hostile bid for the company.

``The rumor doing the rounds is that BHP will increase its bid to 3.8 shares for each Rio share,'' Manoj Ladwa, a derivatives broker at TradIndex in London, said today by phone.

The London-based company gained 236 pence, or 3.7 percent, to close at 6,645 pence on the London Stock Exchange. BHP climbed 1.4 percent to 2,020 pence.

Rio rejected BHP's sweetened all-share offer on Feb. 6, saying it significantly undervalued the company. BHP Chief Executive Officer Marius Kloppers, who is borrowing a record $55 billion to fund the deal, increased his offer to 3.4 shares for every one of Rio's, 13 percent more than its 3-for-1 proposal on Nov. 8.

BHP spokesman Illtud Harri declined to comment in an e-mail. Rio spokesman Nick Cobban declined to comment when contacted by phone.

To contact the reporter on this story: Brett Foley in London at bfoley8@bloomberg.net; Sarah Thompson in London at sthompson17@bloomberg.net.

Last Updated: May 13, 2008 12:41 EDT