MELBOURNE: BHP Billiton Ltd and Rio Tinto Ltd have announced changes to a planned US$116 billion (K311.8 billion) merger of their iron ore operations in the Pilbara region of Western Australia.
In a move likely aimed at appeasing regulators, the mining companies yesterday scrapped plans to jointly market up to 15% of production from their operations.
The companies in June announced a non-binding agreement to a tie-up involving all their WA iron ore assets, to unlock production and development synergies worth more than US$10 billion (K26.88 billion).
“Following discussions between the two companies, Rio Tinto and BHP Billiton have decided not to proceed with the joint venture marketing activity,” they said in a joint statement said.
“As a result, all production from the proposed joint venture would be marketed separately by Rio Tinto and BHP Billiton.”
The companies said the change would “clarify the nature of the joint venture” for customers and stress the focus on production synergies.
Head of resources research at UBS, Glyn Lawcock, said the move was likely aimed at appeasing regulators in China and Europe.
“They have obviously been sitting down and looking at the whole proposal, with a view to getting it past the regulators,” Dr Lawcock said.
“In my view, that would be the Chinese and the European Union,” he said.
He said Australian and US regulators had earlier approved the ultimately unsuccessful full merger of BHP Billiton and Rio Tinto.
“That would have meant the marketing was totally combined,” he said.
Under the previous joint venture plan existing customers would have maintained dealings with Rio Tinto and BHP Billiton separately.
But up to 15% of production, sold to emerging customers, would have marketed jointly on the spot market or via agreements. – AAP