Alcoa, the American aluminium group, has reserved the right to raise to 25 per cent its stake in a joint bidding vehicle for Rio Tinto, the mining company.

China and Alcoa have jointly acquired 9 per cent of Rio through a vehicle called Shining Project, in which Alcoa has a 5 per cent stake. However, The Times has learnt that Alcoa has entered a contractual relationship with Beijing that gives it the right to raise its holding in the vehicle to 25 per cent.

That figure is significant, because it equates to the rough proportion of aluminium assets in Rio Tinto after its acquisition of Alcan, the Canadian aluminium producer. Alcoa lost out to Rio in a bitter bidding war for Alcan last year and the American group sees a rival bid from China as a way of trying to claw back those assets.

The revelation, to be disclosed in a regulatory filing in the United States by Alcoa this week, also sheds light on China's intentions toward Rio. Chinalco, the Chinese state-backed miner, said last week that it had no plans to bid for Rio but it reserved the right to make a bid for the company if a third party put an offer on the table.

Yesterday, BHP Billiton raised its bid for Rio, offering 3.4 BHP shares for every Rio share. The bid valued Rio at about £54.29 a share, still below the £60 paid by Chinalco and Alcoa for their stake. The increased bid of about £70 billion was rebuffed.

Sources said that China was likely to proceed with a counterbid, given its vehement opposition to a merger of BHP and Rio and the stranglehold that the combined group would have on the iron ore market, on which China relies heavily.

A source said yesterday that China, which is starting its lunar new year holiday, would take its time before showing its hand. “The key ingredient for them on this is time,” the source said, “but to put $14 billion on the table means they have to be serious.”

Analysts have said that China could try to strike a deal with BHP, to carve up the iron ore assets, although one source close to BHP said that it would be impossible for the company to do “sweetheart” deals with Bejing. “We will talk to them as a shareholder, but that is all we will do,” the source said.

BHP shares fell 7.5 per cent to A$36.66 in Sydney, their biggest one-day percentage fall in 20 years. In London, they closed down 4.8 per cent at £15.20. Rio closed down at £54.17, or about 4.6 per cent higher than the value of BHP's offer.

The opportunity to piggyback a potential bid for Rio could be Alcoa's salvation as an independent company.

Its $27 billion bid for Alcan last year was considered by both shareholders and analysts to be a desperate attempt to become too big to be taken over and thereby to remain in control of its future.

Ironically, both Rio and BHP are understood to have considered buying Alcoa early last year.

When Rio bought Alcan for $38billion in July, it appeared that Alcoa would also succumb to a predator, but the credit crunch struck immediately afterwards and the company has survived.

Alcoa is considered to have some of the world's best reserves of bauxite and alumina, the raw materials used to make aluminium. However, it needs access to cheap electricty to make the metal and it is not as competitive as rivals that have access to cheap hydro power or gas reserves.

A grab for Rio's Alcan assets would improve Alcoa's costs of production and its profitability.

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