It is a story that, it seems, won’t go away. The marriage or BHP Billiton and Rio Tinto may have failed to reach the altar last year, but the logic behind it remains attractive to some.

One such is Michael Rawlinson, of Liberum Capital, a respected mining analyst, who revisited the subject yesterday and, in the process, helped to lift Rio’s shares to the top of the list of FTSE 100 risers.

“We feel there have been big changes since BHP Billiton walked from Rio Tinto last year and that the stars are now aligning for it to be able reach an agreed bid,” Mr Rawlinson said. He suggested that BHP may cut the ratio of shares it offers for every one of Rio’s from the rebuffed 3.4 offer to 2.5, adding that the combined group could squeeze out about 65 per cent – £16 billion – of Rio’s market capitalisation in cost savings.

There was another indication that the wind may have changed in BHP’s favour once again: the Australian regulators who are considering whether to approve Rio’s sale of stakes in its assets to Chinalco, of China, ruled yesterday against a Chinese takeover of Oz Metals, an Australian miner, on the ground that Oz’s rights included land at a weapons testing site in South Australia.

According to Mr Rawlinson: “Time is running out for BHP to put their pristine balance sheet and premium equity rating to good use.” Particularly because capital markets are easing, potentially allowing Rio to launch a rights issue should the Chinalco deal fail. Chinalco signalled is readiness to press ahead by arranging a $21 billion (£15 billion) syndicated loan with Chinese banks to fund its purchase of Rio assets. Rio Tinto rose 96p to £24.78. BHP fell 50p to £14.09.

BHP’s fall was broadly in line with declines across the mining sector after China said that profits in its biggest industrial companies had fallen 37 per cent in January and February from a year ago, with steelmakers and other producers of nonferrous metals suffering the most pain. Deutsche Bank added to the downward pressure on the sector by cutting its forecasts for metals and some British mining stocks. It cut Kazakhmys, which slid 18¼p to 378¾p, to “sell”, and BHP Billiton to “hold” from “buy”. It raised its price target for Xstrata to 569p and the shares rose 11p to 474¾p.

Barclays jumped 33.7p to 173.8p after it said that its balance sheet had passed a stress test by the Financial Services Authority. That would strengthen its hand in negotiations over entering the Government’s asset protection scheme. Lloyds Banking Group rose 7.1p to 76.1p. The rise in banks failed to offset the fall in mining stocks and insurers, however, and the FTSE 100 finished down 26.35 points at 3,898.85.

In the FTSE 250, Dairy Crest rose 34p to 258½p after it sold its 49 per cent stake in Yoplait Dairy Crest to the Yoplait Group for £63.5 million. Citigroup said that the deal should alleviate concerns over the need for a rescue rights issue.

Tomkins, the car engineer, gained 7¼p to 127¼p after Goldman Sachs up-graded from “sell” to “neutral” but cut its target price from 130p to 120p.

— New York: Cautious investors sent stocks lower, but not enough to keep the market from notching its third successive weekly advance. The Dow Jones industrial average closed at 7,776.18 points, down 148.38.

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