Rio Tinto Ltd shares plunged 35 per cent at the start of their trade on the Australian stock exchange after rival BHP Billiton Ltd axed its takeover bid for the company, citing global economic volatility.
The fall mirrored a similar drop in Rio Tinto's London-listed shares overnight, which closed just over 36 per cent lower.
"Rio Tinto fell quite heavily in London overnight so it was expected and that's why the ASX delayed it for an hour," CMC Markets senior dealer Dominic Vaughan said.
"I think people will need to review Rio over a point in time, they still have some heavy debts on their book and there are issues with selling assets to monitor that debt.
"They are going to find it difficult (to sell assets) in this environment."
Rio Tinto shares dived $22.90, or 35.8 per cent to $41.00 when they began to trade at 1100 AEDT, and were down $21.80 at $42.10 at 1127 AEDT.
At the same time, shares in BHP Billiton gained $2.14, or 8.16 per cent, to $28.36.
BHP Billiton said concern about taking on greater debt and the difficulty of divesting assets in the current market had contributed to the decision not to proceed with a formal bid.
Rio Tinto chairman Paul Skinner said he was not surprised that BHP Billiton had terminated the bid
in the current financial environment.
"We were seeing a number of pressures building around the proposition," Mr Skinner told reporters in Sydney on Wednesday.
"I suppose we can't be totally surprised they (BHP) have decided that it might have been a bridge too far."
Rio Tinto said in a statement it would continue its strategy of operating and developing large scale, long life, low cost assets to generate significant value for shareholders.
