BHP Billiton, the world’s largest mining company, raised its bid for Rio Tinto to more than £70 billion late last night as it emerged that Rio’s new Chinese shareholder was already preparing to counterbid.

The battle for control of Rio dramatically intensified as BHP launched a hostile offer worth 3.4 of BHP’s shares for every one of Rio’s.

The deal values Rio at £54.29 a share, just 5p below its closing price yesterday but way below the £60 a share that the Chinese paid for their stake last Friday.

Chinalco, the Chinese aluminium producer, and its partner Alcoa, bought a 9 per cent stake in Rio, splashing out $14 billion (£7 billion) in Bejing’s biggest foreign investment. This has effectively set a benchmark price for the world’s second-largest miner.

Rio Tinto said last night that it was considering BHP’s offer and urged shareholders to take no immediate action.

Sources close to Chinalco had earlier said that it was likely that China would intervene and counterbid if BHP raised its offer, although observers said it could face regulatory hurdles. The Chinese are already seeking approval in Australia to raise their holding to 19.9 per cent and may go further to ensure that BHP is blocked.

In a message to Rio shareholders, BHP said that its offer was a one-off and would unlock value in both companies. It said that its offer would become unconditional once 50 per cent of Rio shareholders accepted it.

Sources said that BHP’s tactic was to try to build early momentum for its offer and prevent its investors from sitting on the fence waiting for the Chinese to counterbid.

Marius Kloppers, BHP’s chief executive, said that the 3.4for1 offer represented a 45 per cent increase on the value of Rio’s shares before his initial approach last November. Under last night’s offer Rio shareholders would own 44 per cent of the combined company.

Rio’s board rejected the first approach claiming that it undervalued the company.

If successful, BHP’s bid would create a natural resources giant worth more than $300 billion with leading positions in iron ore, copper, aluminium, coal and uranium. The deal would also be the second-largest takeover after Vodafone’s acquisition of Mannesmann in 1999.

Sources have said that China had decided to make its move because it could not tolerate a combined BHP-Rio having a stranglehold on the global iron ore market.

China is one of the world’s biggest consumers of iron ore, which it uses to manufacture goods and materials that drive its booming economy.

A source close to Chinalco said: “They are not going to sit back and let that happen. BHP has to see that its largest customer has a limitless amount of money and this is a matter of the highest political importance for China.”

Mr Kloppers believes that a combined BHP-Rio would unlock massive cost savings as the group could pool assets, particularly at their iron ore mines in the Pilbara region of Australia.

These mines supply China with the bulk of the country’s iron ore – the raw material used to make steel.

BHP is also offering shareholders another sweetener as it will launch a $30 billion share buyback if the takeover is successful.

Mr Kloppers said: “This is a unique opportunity to unlock value. We are offering very competitive terms to Rio Tinto shareholders, but the deal will also be value-enhancing for existing BHP shareholders.”

As it announced its offer, BHP also released its results for the six months to the end of December. Its revenues rose by 15.5 per cent to about $25.5 billion and underlying profits were up by 5.4 per cent to $9.6 billion.

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