Neither Alcoa nor Rio Tinto would comment on the rumors.
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"There is a rumor going around that Rio Tinto has secured a $25 billion syndication loan to acquire Alcoa for $25.5 per listed share," a trader said.
In the options market, buyers were loading up on the $18 strike calls in Alcoa that expire later this month, as well as June $18 calls.
Investors often turn to equity call options, which grant them the right to buy the stock at a fixed price any time up until expiration, to speculate on share price appreciation.
"So some investors might be buying these calls on hopes for a takeover announcement in the near future. The May $19, June $19 and June $18 strike calls were also seeing heavy trading," said Frederic Ruffy, an options strategist at New York-based Web information site WhatsTrading.com.
Alcoa slashed its costs over the past two years when the global economic downturn sapped demand for the lightweight metal. While its earnings have pleased Wall Street and its shares have surged nearly 16 percent so far this year, analysts have been worried about its sales growth.
Aluminum prices have been moving higher, but have not reached levels seen before the recession.
One analyst said the market talk that Rio was interested in Alcoa had surfaced in the market before, but doubted that Rio was interested in the U.S. company currently.
"I don't think aluminum is something Rio wants to double down with now after they purchased Alcan a few years back and probably regret it," said Bridget Freas, an analyst with Morningstar
"I think it's a bit inconsistent with their thinking," she added.
Another analyst, who could not be quoted because he was not authorized to talk with the press, said the rumor of Rio's interest in Alcoa was nothing new, but a move by the company could face regulatory problems.
"They already own Alcan, so would there be an antitrust issue?" the analyst said.
"If someone had said BHP, I might be more inclined to believe it," the analyst added.
Alcoa's shares were up 3.6 percent at $17.85 on the New York Stock Exchange, while Rio Tinto shares were down 1.8 percent at 4280 pence.
(Reporting by Matt Daily, Steve James and Carole Vaporean in New York, Doris Frankel in Chicago and Stefan Schaaf in London; Editing by Maureen Bavdek, Dave Zimmerman)