BHP Billiton Ltd, the world's largest mining company, has terminated its multi-billion takeover proposal for rival Rio Tinto Ltd citing the deteriorating of global markets.

The company said the all-scrip takeover bid was no longer in the best interest of BHP Billiton shareholders.

``While we have not changed our view of the basic industrial logic of the combination, or of the longer term prospects for natural resource demand growth driven by emerging economies, we have concerns about the continued deterioration of near term economic conditions,'' chairman Don Argus said in a statement.

BHP Billiton was offering 3.4 of its own shares for every Rio Tinto share, with the proposal already clearing regulatory hurdles in South Africa - although with some conditions - Australia and the United States.

The European Commission, the European Union's antitrust regulator, was expected to rule on the takeover proposal on, or prior to, January 15, 2009.

``Recent global events and associated falls in commodity prices have, however, altered risk dimensions,'' BHP Billiton chief executive Marius Kloppers said in a statement.

``The greater debt exposure of the combination plus the difficulty of divesting assets have increased the risks to shareholder value to an unacceptable level.''

Vocal opposition to the merger had emerged from steelmakers in Asia and Europe amid concerns a combined entity could have enormous control over global iron ore and other resource commodity prices.

BHP Billiton said it would book a $450 million cost incurred progressing the takeover bid over the past eighteen months.

Meanwhile, BHP Billiton said it would report a $US2.1 billion ($A3.22 billion) impairment charge on its Ravensthorpe and Yabulu nickel assets as a result of a ``significant deterioration'' in the nickel market.

The company has also approved a $US4.8 billion ($A7.35 billion) investment to expand its Pilbara iron ore operations in

Western Australia by 50 million tonnes to 205 million tonnes per annum.

The Rapid Growth Project 5 (RGP5) expansion is expected to deliver first production in the second half of the 2011 calendar year.

``While there is substantial uncertainty in the short term outlook, this investment decision highlights BHP Billiton's confidence that the long term outlook remains positive,'' BHP Billiton chief executive of ferrous and coal Marcus Randolph said in a statement.

AAP