Jan. 30 (Bloomberg) -- Rio Tinto Group, the world's third- largest mining company, rose in London trading on speculation it agreed to ``open its books'' to suitor BHP Billiton Ltd.

``We are hearing BHP have reached an agreement to open books of Rio at 3.5 shares to 1 Rio'' share, MF Global Ltd.'s trading desk wrote today in an e-mail to clients. That would be up from the proposed three BHP shares for every one Rio stock, rejected in November. Rio spokesman Nick Cobban and BHP spokesman Illtud Harri both declined to comment when contacted by phone.

Rio Tinto's advisers say BHP can afford to increase its takeover offer to as much as five shares for one, The Australian newspaper reported today, citing a Macquarie Bank Ltd. analysis.

``These slightly tactical maneuvers are to be expected,'' Tom Gidley-Kitchin, an analyst at Charles Stanley in London, said today in a telephone interview. ``I think this deal will go through, as it's a once-in-a-decade opportunity.''

Rio gained 149 pence, or 3.2 percent, to 4,819 pence by the close in London. The share was at an 8.5 percent premium to BHP's offer, indicating investors expect an increased bid. BHP dropped 3 pence to 1,446 pence.

London-based Rio rejected BHP's initial proposal, now valued at $115 billion, saying it undervalued the company's assets and its prospects. BHP, based in Melbourne, was given a deadline of Feb. 6 by the U.K.'s Takeover Panel to formalize its bid or walk away.

Rio Valuation

Rio's ``stand-alone'' value was 5,400 pence and the savings from combining the operations of the two companies are worth between 1,000 pence and 1,250 pence, Tobias Woerner, an analyst at MF Global in London, wrote today in a report. He rates the stock a ``buy'' with a price estimate of 6,250 pence.

``In this environment, Rio's assets are worth much more than is being shown in this offer because of its exposure to iron ore, aluminum and coal,'' Woerner said today by phone.

BHP is able to boost the bid to 4.25 of its shares for each Rio share, the Australian newspaper said. This rises to five- for-one assuming the combination's stock is worth 10 percent more after the merger, it reported. BHP Chairman Don Argus was to meet with his board in Melbourne today, the newspaper said.

The merged company would control a third of the world's iron-ore market and more energy coal, copper and aluminum than any of its rivals.

To contact the reporter on this story: Brett Foley in London at bfoley8@bloomberg.net. Mark Herlihy in London at mherlihy1@bloomberg.net.

Last Updated: January 30, 2008 12:37 EST