BHP shares surged 5.5 percent to 50.00 dollars (46.85 US) after the opening bell before easing slightly to 49.64 at midday (0200 GMT).

The rise followed a report in The Australian newspaper that said Chinese interests had approached a major Australian investment fund to help it buy a nine percent stake in BHP.

The report, which did not quote sources, said the attempt to team up with an Australian fund was designed to avoid increasing sensitivity in Canberra at moves by Chinese state-owned entities to buy Australian resources firms.

It said that under the terms of the proposed deal, the Chinese would take 4.5 percent of BHP Billiton, while the other half would be split between the Australian fund and a global private equity investor.

The share raid speculation stems from China's strong opposition to BHP's proposed 147.4 billion US dollar takeover of rival Rio Tinto, which Beijing believes would create a behemoth with too much power over commodity prices.

In February, China's state-owned aluminium group Chinalco joined with US firm Alcoa to buy nine percent of Rio shares worth about 14 billion US dollars.

BHP said it knew nothing about China buying a stake in the company last month in response to a query from the Australian Securities Exchange.

But Ord Minnett client advisor Tony Chidiac said the speculation remained persistent, with Chinese steel group Baosteel rumoured to be in the mix.

‘Those rumours don't seem to be going away,’ he said.

‘The markets are not believing the denial that Baosteel in China are not looking into BHP and Rio, particularly BHP.’

Rio shares were up 1.86 percent at 155.31 at midday in a rising overall market.