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Chip Goodyear, the out-going chief executive of BHP Billiton, was spotted in Dublin on Tuesday night dining with Tom Albanese, the incoming chief executive of Rio Tinto.

That’s the story. That’s why shares in Rio were up 7 per cent on Wednesday. And that’s a £1.6bn bill for food, wine and additional bid premium if it really is true that BHP wants to merge with Rio to create a £64bn mining giant.

Oh, and there’s a Merrill Lynch mining conference going on Dublin at the moment, which may have something to do with all this. And Chris Lynch, a divisional chief at BHP, held an analysts’ lunch in Sydney overnight, and was reportedly talking his company’s stock up…
For what it’s worth, Rio and Billiton did get close to a merger — but that was about seven years ago, when Mick Davis was on the scene.

“People are putting all these things together and coming up with a done deal,” one banker remarked on Wednesday. “I believe it is smoke, rather than fire. People do have dinner. That said, these are extraordinary times.”

Later, a Rio statement to the Australian Stock Exchange said: “Rio Tinto is not aware of any takeover approach from BHP Billiton.”

If a deal really were on, Heath Jansen, an analyst at Citigroup, would be ringing the bell. He published a note on Friday, entitled “Is Rio Tinto on the chopping block?”

“The de-rating of Rio Tinto over the past 18 months has opened up a valuation arbitrage. As we have highlighted on previous occasions, Rio Tinto is now trading on a circa 50% discount to our Sum of the Parts valuation of £48.53 and is now well into LBO territory. We revisit our analysis and believe the rerating of Rio Tinto is either going to come down to the company itself through greater buybacks or by someone acquiring the company…”