UPDATE: BHP, Rio Tinto Iron Ore JV Won't Lessen Competition
June 16 2009 - 8:53PM
Dow Jones News
A proposed joint venture between BHP Billiton Ltd. (BHP) and Rio
Tinto Ltd. (RTP) to merge their Western Australian state iron ore
mining businesses won't lessen competition between the two to
market the raw material, Australia's Trade Minister Simon Crean
said Wednesday.
The proposed merger would see the two companies, which dominate
exports from the Pilbara region in Northwest Australia, share iron
ore export facilities in a bid to gain efficiencies and get costs
down, he said.
"They will still operate as separate marketing arms, they will
therefore be competitors and so there won't be any lessening of
competition," Crean told reporters.
"When the details of the proposal emerges there will be
acceptance of that," he added.
China has raised concerns about an Australian export monopoly
emerging as a result of the proposal.
The proposed merger of BHP and Rio iron ore operations came
after the collapse in early June of a proposed US$19.5 billion deal
between Rio Tinto and Aluminum Corp. of China, or Chinalco.
Rio Tinto Chairman Jan du Plessis said that improving market
conditions were behind the decision to terminate the tie-up with
Chinalco, which had been designed to ease Rio's US$38.7 billion
debt burden.
Crean said the government doesn't have any bridge building to do
as a result of Rio backing out of the deal with Chinalco, which he
described as an "eye-opener" for China. "It's going to be an
important learning curve for China" to understand the role that
shareholders have in these considerations, he said.
"It was the shareholders' reaction that fundamentally saw Rio go
off and cut another set of arrangements."
Beijing accepts that the Australian government was genuinely
trying to work through the national interest implications of the
Chinalco proposal and that it wasn't any decision by the Australian
Government that saw the proposal fail, he said.
A US$1.39 billion purchase of assets of Australia's OZ Minerals
Ltd. (OZL.AU) by China Minmetals Non-ferrous Metals Co. is a good
example of how Australia can accommodate Chinese investment,
including by a state-owned enterprise, he said.
Crean also said stalled talks between Australia and China about
a free trade agreement weren't connected in any way with Rio's
proposed deal with Chinalco.
"The re-opening of the FTA with China is fundamentally now in
China's hands at the political level," he said.
"I don't think there's any point at this stage in continuing
negotiations at the official level, because they've run to a
standstill...and need the political will injected," he said.
-By Ray Brindal, Dow Jones Newswires; 612-6208-0902;
ray.brindal@dowjones.com