BHP and Rio Tinto announce joint venture

Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4 /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-qformat:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin:0in; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:"Times New Roman"; mso-fareast-theme-font:minor-fareast; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin;} Mining giants BHP Billiton and Rio Tinto, on opposite sides of a takeover tug of war for much of last year, have agreed a joint venture to combine their major Australian iron ore operations and share port and rail facilities.   The deal is expected to save Rio and its former suitor BHP around $10 billion.   "The synergies in this combination are so substantial that both companies have been investigating ways to combine these operations for more than a decade," said BHP chief Marius Kloppers.   BHP will pay Rio nearly $6 billion to take its equity interest in the joint venture to 50 percent. As well as the joint venture with BHP, Rio Tinto will launch a rights issue to raise $15.2 billion.   One consequence of this deal is the scrapping of another. Rio Tinto announced a $19.5 billion (┬ú12.1 billion) deal with Chinese resources conglomerate Aluminum Corporation of China (known as Chinalco) in February, which already has a nine percent stake in Rio.   Had it gone through, the deal would have doubled Chinalco's holding in Rio, which will now pay the Chinese company $195 million in compensation for pulling out.   The deal with Chinalco was originally announced in February, when commodity prices were low. They have since recovered strongly, making the terms of the deal less attractive.   "We are very disappointed with this outcome. We had maintained an extremely flexible and constructive attitude in our consultations with Rio Tinto," said Chinalco president Xiong Weiping.   Asian customers, who source roughly 60 percent of their iron ore from Australia due to geographical proximity, were relieved when BHP dropped its takeover bid for Rio Tinto last year, and are likely to be less than impressed with the new joint venture.   The Rio/BHP combination would supply around 270 million tonnes of ore a year, while the world's top producer, Brazil's Vale, supplies around 240 million tonnes a year.   Between them, these three control roughly 70 percent of the worldÔÇÖs iron ore trade.   *┬á┬á┬á┬á┬á┬á┬á┬á┬á *┬á┬á┬á┬á┬á┬á┬á┬á┬á *