Rio Tinto Says BHP Iron Ore JV May Face Asset Sales
June 16 2009 - 10:13PM
Dow Jones News
Rio Tinto Ltd. (RTP) said Tuesday there is a risk it and BHP
Billiton Ltd. (BHP.AU) could be forced to sell some assets to win
approval from regulators for their planned iron ore joint venture
in the Pilbara region of Western Australia.
In a section of the offer document for its US$15.2 billion
rights issue outlining potential risks, Rio said the joint venture
with BHP is subject to approval by competition regulators in
Australia and European and that winning approvals could require
asset sales.
"Rio Tinto and/or BHP Billiton may be required to divest, or
commit to divesting, businesses and/or assets to third parties
and/or to make other commitments or concessions to the regulatory
authorities which may make the transaction less financially and
operationally attractive," Rio said in the document.
Rio also noted that some of the US$10 billion in synergies the
pair are targeting from the joint venture will depend on winning
the cooperation of existing joint venture partners at the iron ore
operations.
Also in the rights issue document, Rio said it remains in talks
with Chinese steelmakers over contract iron ore prices, after
agreeing cuts to prices of between 33% and 44% with Japanese and
Korean steel mills.
"The outcome of those negotiations is uncertain and could have a
material impact on the group's profitability during the 2009-10
contract period," Rio said.
The miner reaffirmed its guidance for iron ore production, on a
100% basis, of 200 million metric tons in 2009, based on an
expected recovery in Chinese steel demand in the second half.
Rio has announced production curtailments in its aluminum
division in response to falling prices and said it now expects full
year aluminum output to fall 6% on year to 3.8 million metric
tons.
The miner also said its 2009 alumina production rate is expected
to fall 6% on year and that its bauxite output for the year is
expected to be about 32 million metric tons.
-By Alex Wilson, Dow Jones Newswires; 61-3-9292-2094;
alex.wilson@dowjones.com