Upbeat in Rio after the conflict

Mr Skinner and his counterpart at BHP, Don Argus, have sent letters to shareholders following their respective financial results.

Mr Argus said that BHP still expected the regulatory approval process - including a ruling from the European competition regulator - would be finished by "around the end" of the calendar year. The European Commission halted its second-phase investigation of the deal temporarily last week as it waited for BHP to send in more information.

If it receives approval, BHP plans to then mail the offer documents to Rio shareholders and convene an extraordinary meeting of BHP shareholders to vote on the takeover plans.

Both companies had record earnings despite a volatile market. Merrill Lynch yesterday raised its earnings forecasts for Rio by 3 per cent next year and 5 per cent the following year after factoring in higher thermal and coking coal prices and a weaker Australian dollar.

The broker said it expected iron ore prices to rise by another 15 per cent next year, following this year's 85 per cent gain. But it said the different settlements by Australian and Brazilian producers meant the benchmark pricing system was "no longer relevant and is dying a slow death".