14 November 2007 | Paul Snell

A potential merger between two of the world's biggest mining firms could create more than $850 million (£408 million) a year in procurement savings.

Australian mining firm BHP Billiton has proposed a merger with rival Rio Tinto as "the most logical and compelling consolidation for both companies". BHP is now seeking support from Rio Tinto shareholders for its proposed deal.

Marius Kloppers, CEO of BHP, said better procurement and economies of scale would account for 56 per cent of $1.7 billion (£818 million) savings a year that could be realised by the third year of a potential tie-up. "The synergies and combination benefits are very compelling," he said.

The deal would cost $650 million to implement. It would take seven years to achieve the total $3.7 billion savings a year expected.

The firm added that a combined company would be better able to meet the strong demand in commodities from China, India and other emerging economies.