Australian shares were lower in early afternoon trading on Friday as mining heavyweights BHP Billiton and Rio Tinto gave back gains made earlier in the week.

'The market started off on a negative note as caution remains though the selling momentum has

gathered pace,' said David Land, an equity analyst at CMC Markets.

At 1:30 p.m. (0330 GMT) the S&P/ASX 200 was down 116.8 points or 2.1 percernt at 5,403.6

while the All Ordinaries index was down 108.2 points or 1.9 percent at 5,479.1. Both indexes rose for the fourth consecutive day on Thursday.

Land said 142 of the top 200 companies were lower with BHP alone accounting for 18 points of the fall.

BHP fell 2.6 percent to A$42.25, dragged down by a retreat in metal and oil prices.

Rio Tinto was down 3.7 percent at $140.55 despite Chief Executive Tom Albanese telling shareholders at the group's London annual general meeting on Thursday that the world's third-largest miner had the potential to double or even treble the production of key commodities.

As well, speculation faded that BHP Billiton had any immediate plans to increase its 3.4-for-1 scrip offer valuing Rio Tinto at about $147 billion. The speculation began earlier in the week when Liberum Capital analyst Michael Rawlinson said BHP might want to increase its offer before it files the first round of paperwork with EU regulators later this month.

Pallet supplier Brambles was among the biggest decliners, dropping 11.2 percent to A$8.89

after announcing that one of its key customers, Wal-Mart, might contract with a third party to provide pallet management services now provided by Brambles' CHEP division.

Banks were also weaker with National Australia Bank dropping 1.8 percent to $27.83, Commonwealth Bank off 2.7 percent at $41.32, ANZ down 1.8 percent at A$20.34 and Westpac off 1.4 percent at A$22.21.