BHP Billiton’s £62 billion bid for Rio Tinto has set the stock market buzzing with rumours that there will be other mergers in the mining sector.

Last week traders were examining the possibility that Xstrata could launch a £50 billion takeover of Anglo American. Anglo’s share price rose 132p to £32.86 on Friday, up 10 per cent in a week.

Another rumour suggested that Anglo would bid for Xstrata - its share price rose 106p to £34.19 on Friday, up 13 per cent for the week.

The speculation is driven by a belief that mining companies will respond to BHP’s proposed acquisition of Rio, which will create a resources giant worth more than £160 billion.

BHP-Rio would enjoy a strong position in key resources such as iron ore, copper and coal and rivals fear that it would be able to demand higher prices and stifle competition.

Another rumour was that Vedanta, the Indian mining company listed in London, could be bought by Chinese investors. The possible price cited was £25 a share and the company’s shares rose 112p to £23.04 on Friday, up 13 per cent for the week.

The company denied that an offer had been made and analysts pointed out that it was unlikely that India would allow the sale of such a strategically important national champion to China.

Mining companies can afford to make acquisitions because they are flush with cash from a boom in commodity prices.

Buying companies with existing production can make more sense than developing a new mine, which can take a decade or more and cost billions of dollars – with no certainty that the resources are as rich as geologists predict.

At least the rumours have breathed life into the mining sector and most observers believe that consolidation is inevitable – but the big deals may have to wait until the BHP-Rio situation is resolved.

Rio Tinto bought Alcan, the Canadian aluminium producer, this year and raised $40 billion (£19 billion) from banks to finance the deal. Last week BHP raised $70 billion in promissory notes from banks to cover a $30 billion share buyback that it has proposed if its takeover of Rio is successful.

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