BHP Billiton is understood to be planning to push ahead with its $119 billion (£61 billion) offer to buy Rio Tinto, despite a last-minute attempt by China’s Government to break up the deal.

China’s purchase of a 9 per cent stake in Rio Tinto on Friday stunned the markets and BHP and cast doubt on whether the mining group would be able to launch a full offer by a Takeover Panel deadline on Wednesday.

Sources said that it would be hard for BHP to proceed, given that Bejing effectively now has a blocking stake in Rio Tinto and is determined to emerge as a powerful force from this round of industry consolidation.

However, other sources last night said that Marius Kloppers, BHP’s chief executive, was not deterred by China’s move.

One described it as “just another factor which muddies the water” and said that Mr Kloppers was minded to press ahead with BHP’s bid regardless.

BHP’s determination to proceed came as it emerged that Vale, the world’s second-largest mining group, which is considering a bid for Xstrata, the Anglo-Swiss mining group, dropped Merrill Lynch as one of its lead advisers after the investment bank decided against helping to finance the bid.

It was not immediately clear whether BHP plans to raise its present offer of three BHP shares for every Rio share, which Rio has rejected as undervaluing the company.

BHP has argued steadfastly that this is not a case of measuring premiums over share values, since Rio’s investors are being offered 41 per cent of the enlarged group.

Mr Kloppers is understood to be reluctant to raise his bid, given that there is currently no other offer on the table. A raised offer would, in essence, mean that BHP was bidding against itself.

The other option, and the one that seems most likely, is that BHP will launch a hostile bid, bypassing Rio’s management and sending the offer directly to the group’s shareholders, many of whom also own BHP shares.

BHP is believed to be unconvinced that China will proceed with a bid for Rio, given that Chinalco, the state-run mining company that conducted the raid on the shares, would have to follow through with an all-cash bid worth in excess of $200 billion.

Under UK Takeover Panel rules, Chinalco would have to make a full offer in cash, having already bought its 9 per cent stake in cash.

BHP’s board is to meet today or tomorrow to make a final decision and iron out last-minute details.

The group is most likely to declare its intentions on Wednesday, when it is also set to report its full-year earnings.

A spokesman for BHP last night declined to comment on the Rio bid, saying only that the company was considering all its options.

A spokesman for Rio said the China stake showed that there was a lot more value than BHP was attributing to the stock.

A source close to Rio insisted that if BHP launched its three-for-one share offer, investors had already indicated that they would reject it.

Chinalco will continue to raise the pressure, however. Xiao Yaqing, its chairman, is this week due to meet Australian government officials in Sydney to brief them on his lightning share raid and seek approval to raise his stake further still.

The visit will fuel speculation that Chinalco and its partner Alcoa, the American aluminium miner, may be laying the groundwork for a potential full takeover.

Times Recommends

• Pound falls to new low ahead of Brown rescue deal
• Lehman Brothers faces Korean takeover bid
• Google takes on Microsoft with browser