China's Sinochem has hired banks to advise the company on how to foil BHP Billiton's $39 billion bid for Potash, sources said, in a sign that Chinese officials are moving ahead with plans to block the deal despite heavy obstacles.

The move came as the Anglo-Australian miner warned it would not be caught in an expensive bidding war for the world's largest fertilizer group. State-owned chemicals group Sinochem has hired Deutsche Bank and Citigroup to evaluate measures to counter BHP's bid for Potash, two sources with direct knowledge of the matter said. The sources were not authorised to speak publicly on the matter.

Both banks declined to comment. Sinochem could not be reached for comment on Wednesday, a public holiday in China.

Though it was still unclear whether a serious rival bid from a Chinese consortium would emerge, news of the banking mandates underscored China's willingness to try and stymie the deal with a rival offer or by buying a blocking stake in Potash.

"They (China) would very much like to make an offer. I think they would have concerns about how the regulatory authorities would view an offer but that might not stop them having a go anyway," said Mark Taylor, senior resources analyst at Morningstar.

Interest in Potash is being fuelled by an expected surge in fertilizer demand from China, India and other emerging economies due to rising food consumption.

Late on Tuesday in Canada, BHP Chief Executive Marius Kloppers said he was unconcerned by the possibility of a rival bid emerging for the Potash, and said the miner would rather drop its bid than raise the offer to a level that exceeded good value for its shareholders.

"If somebody offers a price at which we cannot demonstrate value for our shareholders, we're probably not going to show, and I think that continues to be the case," Kloppers said in an interview with Canada's Business News Network.

BHP shares ended up 0.5% in Sydney, in a broader market up 0.2%. Analysts suggested BHP might raise its offer but it was still unclear whether a serious white knight would emerge.

On Tuesday, Potash's U.S.-listed shares closed at $147.5, a 13.5% premium to BHP's offer.

Given the political obstacles in Canada, any Chinese bid would have to be part of a larger consortium to have a chance of succeeding, analysts say. One obstacle facing officials in Beijing is that China - as a top consumer of potash - wants to keep prices low for the vital crop nutrient, whereas most consortium members would want to maximize returns with higher prices.

China sovereign wealth fund CIC has been mentioned as a potential Sinochem partner, but even a $300 billion fund has limits on how much it can spend.

However, Sinochem could stymie BHP's offer as China's Chinalco did in 2008 when it joined forces with Alcoa to buy a stake in Rio Tinto, which was subject a hostile bid from BHP at the time.

Sinochem has approached Singapore's Temasek Holdings to join a consortium that may make a bid, sources have previously said.

BHP Boss Lobbies Canada

In a separate interview with Canada's Globe and Mail newspaper, Kloppers said BHP was sticking with its plan to drop out of the Canpotex potash marketing cartel - effectively triggering its demise - if BHP's bid succeeds.

He spent the day in Toronto, Canada's financial hub, aiming to drum up support for the bid and seeking to allay concerns BHP's strategy would hurt Potash's home province of Saskatchewan.

BHP says all of Saskatchewan's low-cost producers would benefit from market-based pricing, generating more revenue for the province, but sources working on the deal told Reuters that the miner would not move quickly to dismantle Canpotex.

Potash shares on Tuesday fell 95 cents to $147.52 in New York but remain well above the $130 offer price, suggesting investors anticipate a richer offer will eventually emerge.

Kloppers said BHP was focused on clearing regulatory hurdles in Canada and the U.S., not on potential rivals. BHP this week extended its offer by a month to Nov. 18 after Canada's competition regulator sought more information.

The sources working on the deal said regulators wanted more details about BHP's plans for its existing Jansen potash project in Saskatchewan and its marketing strategy.

The regulatory process is taking on political overtones, with some opponents of the deal fearing a breakup of Canpotex, which accounts for a third of global potash exports and has helped buoy prices for years. Potash is one of three Canpotex members.

Kloppers is due to meet Canada's leading opposition parties on Wednesday, but will not meet Prime Minister Stephen Harper. BHP has hired three former advisers to Canadian prime ministers, including one who worked for Harper, to help build political support.