As the decision takes a heavy toll on Rio’s share price, market watchers are already performing the post-mortem on BHP’s reasoning and what it means for the mining industry as a whole.

One trader and analyst told MiningNews.net BHP Billiton may have been unable to secure the approximately $US55 billion in debt needed to fund the acquisition, however other sources suggest financing was not an issue.

The trader also said BHP clearly didn’t want to sell the assets that the European Commission wanted sold before the deal was rubber-stamped, suggesting that while economic circumstances have played a role in undermining the bid, the regulatory hurdles also proved too great for the miner to clear.

Other analysts point out Rio paid far too much for Alcan ($US38.1 billion or $A59 billion) in what now seems to be a particularly ill-timed move.

Rio’s market capitalisation in Australia has sunk to nearly half what it paid for the aluminium producer. Rio’s market cap this morning is sitting at $A19.7 billion domestically, while in London it was last at £22.5 billion ($A54 billion).

As for Rio’s debt position – while it is in no way a company sinker – BHP is now in no hurry to be saddled with any additional debt requirements given the commodity price slowdown.

Today Rio chairman Paul Skinner told media the company wasn’t worried about its $US42 billion in debt and would not be issuing any equity to pay it down.

“We are comfortable with our financial position,” he told Dow Jones Newswires this morning.

Fat Prophets resource analyst Gavin Wendt said BHP’s move made sense given how much the world economy and commodity demand had changed.

“It is a very, very different picture to where we were 12 months ago when BHP announced its bid, so I think it’s really just a prudent action on the part of BHP in regards to its shareholders and to keep its powder dry in the current circumstances,” he told MNn.

Wendt agreed with other analysts who said the European Commission’s objections played a significant role in BHP’s decision to abandon the bud.

“Although we’re not privy to the actual objections … our view is that iron ore was always going to be the big sticking point,” he said.

“One of the key attractions of the bid would be the merged group’s dominance in iron ore, but to sell off those key assets would detract from what BHP described as the ‘compelling logic’ of the bid.”

Wendt also said BHP may have struggled with financing and the debt may have come with far more onerous obligations than the major had bargained for.

In Australia, the news has sent Rio’s share price plunging to a low of $A40.80, a 36% fall from last night’s closing price of $63.90, before recovering fractionally to $42.82.

BHP’s share price has jumped $2.09 to $28.31, suggesting the market in general thinks BHP has been left in a much stronger position than its former target.

A BHP shareholder this morning told MNn he was happy the bid fell through, as it leaves BHP – with its exposure to energy as well as metals – in a much stronger position.

Some analysts also suggest BHP may well come back with another offer down the track. Additionally, the cancellation of the bid could suggest the major has other, more easily digestible, targets in its sights.

With mining equities trading at three to five-year lows in Australia and on other exchanges such as London and Toronto, there are plenty of relatively cheap assets that could be picked up by a well-placed predator with a long-term view.

Fat Prophets’ Wendt agreed, but said he didn’t believe BHP would go out on the rebound “like a scorned lover” and indulge in a spending spree.

BHP may also prefer to focus on its internal growth plans given the state of commodity prices.

Meanwhile, Chinese state-owned aluminium play Chinalco – Rio’s largest shareholder – has signalled it may well buy a bigger stake in the major, taking its shareholding from 12% to 14.99%, the limit allowed by Australian regulators for foreign investment in Australian companies.

According to a report in Bloomberg, Chinalco said the cancellation of the bid would benefit Chinese steel producers, who feared the takeover would force iron ore prices higher.

Reuters, meanwhile, has reported Chinalco could look to go as high as 50% ownership of Rio providing it received regulatory approval.

Chinalco has quickly dampened such assertions saying it had made no decisions on whether to seek more Rio shares beyond 15%.

However, it seems likely from Chinalco’s statements that China is already looking at how to capitalise on Rio’s slump to get a bigger slice of the resources pie.

This means Australian regulators may soon be faced with the question of just how much they are willing to sell.