BHP Rio joint venture on track

November 26, 2009

, SYDNEY, Nov 26 – The world\’s largest miner BHP Billiton Thursday said its iron ore joint venture with Rio Tinto was on track, dismissing speculation the deal could be shelved.

Outgoing BHP chairman Don Argus said both companies remained committed to the tie-up, aimed at savings worth an estimated 10 billion US dollars, despite analyst talk that Rio was getting cold feet.

"There is commentary in the Australian media out here of people not being supportive of it, but that is not the case from within both parties and it is certainly not the case from the majority of shareholders," Argus told the dual-listed company\’s Australian annual general meeting.

"There is no doubt about the commitment at the top of either company — this just makes sense," he said, adding that BHP\’s crucial submission to European Union regulators was "being made or is about to be made".

Analysts believe Rio Tinto\’s shareholders could block the tie-up after completing a successful rights issue and selling about 10 billion dollars in assets.

But chief executive Marius Kloppers said BHP hoped to have signed a definitive agreement on the deal and have all its regulatory submissions completed by the year\’s end.

"I continue to be very confident that the interaction that we have had to get to these definitive agreements has strengthened relationships rather than the other way," Kloppers told the meeting.

The joint venture was announced after the collapse of 19.5-billion-US-dollar bid for Rio by Chinese state-owned firm Chinalco, and is aimed at combining the companies\’ vast Western Australia operations.

It also followed BHP\’s dropping last November of a hostile takeover bid for Rio amid the global economic turmoil. Kloppers rejected rumours BHP was considering reviving the swoop.

"Our first priority continues to be to deploy capital in our business," he said.

Kloppers also said BHP remained cautious over the speed and extent of the global recovery, despite "surprising" resilience from China\’s steel mills.

"Even though market sentiment has improved since I spoke at our London AGM a month ago, we continue to believe that we will come out of this recession less strongly than in previous recessions," he said.

However Kloppers remained of the "long-held view that Chinese growth will continue and will continue to be resources-intensive".

Argus added that BHP would have no problem with Chinese investors buying some of its stock, and urged Australia to be open to foreign investment.

China was Australia\’s third-largest investor last year, behind the United States and Britain. It accounted for 49 of the 153 deals involving Asian investors, spending 6.78 billion US dollars, mostly in mining acquisitions.

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