Rio’s shares on the Australian Securities Exchange were hammered this morning, shedding more than 35% in the first few moments of trade.

The company's stocks plunged to a low of $A40.80, down $23.10 or 36% from its $63.90 closing price last night.

BHP’s shares jumped to $28.11, up 8% or $1.89.

In a statement that took analysts and investors by surprise, BHP last night cited the deteriorating global outlook and falling commodity prices as the key motivators for its decision to abandon the bid.

BHP chief executive officer Marius Kloppers also suggested in a statement last night that Rio Tinto’s heavy debt burden after its $US38 billion Alcan buy was also an issue – as was Rio’s inability to shift its unwanted assets, such as Alcan’s packaging division.

“BHP Billiton is very focused on balance sheet strength. Accordingly, the greater debt exposure of the combination plus the difficulty of divesting assets have increased the risks to shareholder value to an unacceptable level,” he said.

Additionally, BHP said divestments that would have been required for the takeover to gain European Commission approval – primarily in coking coal and iron ore – had become untenable.

The major said it would not have been able to achieve “fair divestment values in the required time frames” and the exercise in selling off assets would have added to the cost and risk of the transaction.

The exercise has already been extremely costly for BHP, with the company revealing it would write off some $US450 million in costs incurred for the takeover.

It is estimated Rio Tinto could have spent almost as much mounting its defence against the bid.

Shares in Rio Tinto and BHP Billiton were temporarily suspended this morning until 11am eastern standard time.

Rio’s shares were trading at a significant discount to BHP’s 3.4 share offer. By close of trade in London, Rio’s shares had lost more than 30% of their value, falling £9 to £15.50.