Marius Kloppers, the chief executive of BHP Billiton, has appealed to Rio Tinto's shareholders to accept his improved £70billion offer claiming that the company was not worth even that amount.

The BHP boss began a campaign to woo his rival's shareholders after the Rio board rejected his 3.4 shares-for-one offer yesterday.

The bid is now hostile and BHP must appeal directly to Rio's shareholders for support.

Mr Kloppers said yesterday that Rio's present share price of £54.17 did not support the underlying value of the company, even though he was willing to pay that much to gain control. He said that paying a premium to complete the deal was inevitable now that the bid had gone hostile, but he insisted that Rio's share price had reached its current highs only because of BHP's interest.

“Were it not for the BHP offer, there would have been no uplift in Rio's share price,” Mr Kloppers said. “It is our view that the underlying principles of Rio Tinto do not support their current price.”

According to BHP, Rio's share price has traded at a multiple of 2.7 times BHP's share price during 2007. BHP's present offer is at a multiple of 3.4.

Research by MF Global Securities, a brokerage firm, has contradicted this claim indicating that the multiple has averaged 3.1 since 2001.

With so much at stake, disputes over the value of Rio Tinto, the world's second-largest mining group, are likely to continue for many months. The situation is complicated by the 9 per cent stake in the Rio group held by Chinalco, which made a raid on the stock market last Friday to acquire the shares. Chinalco, the state-owned Chinese aluminium producer, and its partner Alcoa paid £60 a share. Rio shareholders are hoping that this sets a new value level for the company.

Mr Kloppers rejected that and said: “The £60 paid by Chinalco does not set a benchmark. It was the price the Chinese had to pay to get those shareholders to sell. They sold at a premium because they were selling their stake in future returns.”

BHP believes that its offer is more attractive as it is an all-share deal, allowing Rio investors to remain exposed to the booming commodities industry but within a larger group.

Mr Kloppers described the Chinalco share raid last Friday as an “interesting development” but insisted that it did not change BHP's “compelling value proposition”.

BHP has now begun the process of gaining regulatory approval for its deal. Its offer is conditional on government authorities in Europe, Australia, the United States and South Africa agreeing to the merger.

This will buy BHP about nine months before it can start to wrap up the deal, which is strategically important because the Anglo-Australian miner believes that its position will strengthen the longer that it waits.

Sources close to the company explained that a long gestation period could take the bid into a global bear market and in such an environment its offer may appeal more to Rio shareholders. However, a number of shareholders have already expressed doubt that the 3.4-for-one offer will be sufficient to be successful even given the lengthy time that it will take to clear regulatory hurdles.

The addition of Chinalco to the Rio share registry has raised the prospect of the Chinese increasing their stake or bidding outright, which would be done at an even higher price to BHP's offer.

One shareholder said: “This offer does not feel like a knockout blow yet and the real question is what the Chinese are going to do.”

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