BHP Billiton's and Rio Tinto's plans to join forces in iron-ore rich Western Australia (WA) have struck a snag.The merger of the mining giants' assets in the Pilbara region of WA has competition implications because it will create a duopoly between the BH
BHP Billiton’s and Rio Tinto’s plans to join forces in iron-ore rich Western Australia (WA) have struck a snag.
The merger of the mining giants’ assets in the Pilbara region of WA has competition implications because it will create a duopoly between the BHP/Rio joint venture, and Brazil’s Vale, in the international seaborne iron ore market.
Both Rio and BHP had expected resistance from regulators and the German Federal Cartel Office has said it intends to prohibit the joint venture.
“The German regulatory process continues and the parties are expecting to receive a formal notification next week,” Rio said in a statement.
Rio and BHP have argued that the joint venture is “pro-competitive” and that it will have the effect of increasing the supply of iron ore.
But the joint venture faces several major regulatory hurdles, both domestically and abroad.
Rio, which has a bigger presence in WA than BHP, is understood to have gone cold on the 50/50 joint venture, according to media reports.
Increased production
Rio is cranking up its iron ore production to take advantage of strong ore prices, which have just hit a five-month high of just over $US150 a tonne.
The company’s share price took a battering over much of 2008 and 2009 thanks to its unpopular and hugely expensive takeover of Canada’s Alcan.
However the stock, which last traded at A$82.90, has rallied by 40.8% over the last 52 weeks. Most of the gain can be put down to iron ore, which accounts for about 60% of Rio’s earnings .
Rio’s Pilbara system operated in excess of its nameplate capacity in the September quarter, and matched the third quarter 2009 production of 56.8 million tonnes of ore.
Across the globe, Rio’s iron ore production set a new record in the September quarter, rising 10% over the same period a year earlier.
“We continue to run our operations at close to or above capacity rates, taking advantage of strong prices for our products,” chief executive Tom Albanese said.
Rio also achieved record production in alumina and coking coal over the quarter.
Australia’s third biggest iron ore producer, Fortescue Metals Group, said its ore shipments were up 8% in the September quarter compared with the September quarter of 2009.
BHP is expected to issue its third quarter report on October 20.
