Reuters MELBOURNE, Dec 1 (Reuters) - Shares in Australian iron...

Reuters

MELBOURNE, Dec 1 (Reuters) - Shares in Australian iron ore miner Fortescue Metals Group soared 40 per cent on Monday, boosted by rumours that BHP Billiton may make a takeover bid or Chinese firms may seek a stake in Fortescue.

The stock leapt as high as $2.93 before easing back to $2.82 at 0321 GMT, up from Friday's close of $2.06 in a broader market down 0.78 per cent.

Speculation centred on either Chinese interests taking a stake in Fortescue or BHP making a takeover bid for the firm, having dropped its $66 billion bid for rival Rio Tinto last week, mining analysts said.

But fund manager Tim Schroeders, of Pengana Capital, doubted the rumours and said the day's gains had been magnified by short-covering after a recent steep fall in Fortescue shares.

"I think it's people grasping at straws," he said.

"The BHP one can be ruled out plain and simple," he added, noting that Fortescue was saddled with debt and that BHP had dropped its Rio Tinto bid partly because of Rio's indebtedness.

Both Fortescue and BHP declined to comment.

"We don't comment on market speculation," BHP spokesman Peter Ogden said.

Fortescue's volatile shares stood as high as $13.15 in June, before falling to a low for the year of $1.16 on November 20.

The company sells iron ore to 27 Chinese steel companies, its largest customer being Baoshan Iron and Steel Co (Baosteel), China's top steel maker.