BHP and Rio Tinto merger cuts Chinalco out of the picture

Leftofcentresalterego · Post by **Leftofcentresalterego** » Sat Jun 06, 2009 8:17 am

Matt Chambers and Nicola Berkovic | June 06, 2009
Article from: The Australian
SWORN rivals Marius Kloppers from BHP Billiton and Tom Albanese from Rio Tinto sealed a $140billion alliance yesterday that unites their Pilbara operations, dramatically reshapes the Australian mining industry and creates the single biggest iron ore exporter in the world.

Rio yesterday abandoned its $US19.5 billion ($24.3 billion) alliance with Chinese resources giant Chinalco, opting instead to raise $US15.2 billion from existing shareholders and to enter the new iron ore deal with BHP.

Although it is understood the Rudd Government encouraged Rio to consider options other than its controversial deal with the Chinese state-owned company, Rio and BHP have long pursued an alliance in the Pilbara region of Western Australia.

Under the terms of the 50-50 joint venture, which still faces regulatory checks and scrutiny from the West Australian Government, BHP will now pay Rio $US5.8 billion, reflecting the smaller size of its Pilbara operations.

The deal values the combined Pilbara business at $US116 billion - big enough to rank as Australia's second-biggest company behind BHP.

It creates the biggest single iron ore exporter in the world, overtaking Brazil's giant Vale.

During the credit freeze in February, Rio hailed its alliance with Chinalco as the best option for the debt-laden company. The deal would have allowed Chinalco to increase its stake in Rio to 18 per cent and take interests in key mining projects, including 15per cent of Rio's Hamersley iron ore operations in the Pilbara.

Rio said yesterday that improving financial market conditions, and the new deal with BHP, meant it could raise enough money from existing shareholders to solve its medium-term debt problems. Rio will have to pay Chinalco a $US195 million break fee for terminating the deal. A $US275 million fee applies should either BHP or Rio pull out of the new deal.

BHP and Rio have long been bitter rivals, with Rio spending most of last year fighting off a hostile takeover bid from the bigger company.

In the past, however, both companies have talked about combining their Pilbara operations. Mr Albanese, the Rio Tinto chief executive, said the deal with BHP began to take shape in recent months after a meeting between BHP chairman Don Argus and Rio chairman Jan du Plessis.

"While this deal has been more than 10 years in the making, I believe it has been worth the wait," said Mr Kloppers, the BHP chief executive.

Kevin Rudd yesterday insisted Australia welcomed foreign investment and said the Chinalco deal fell over for commercial reasons. However, sources said some members of the Rudd Government had urged Rio to consider options to pay down its debts other than an alliance with Chinalco.

The controversial deal had been subject to approval by the Foreign Investment Review Board, which will now be spared from making a decision.

The Prime Minister warned that the new alliance with BHP would still need to be scrutinised by the FIRB. However, Mr Rudd said foreign investment had always been an important part of the generation of jobs.

"Our policy on foreign investment in Australia is non-discriminatory, our policy on foreign investment in Australia is open and welcome, but consistent with all previous Australian governments, we will make judgments in the national interest," he said. "What's occurred most recently is entirely a commercial matter between Rio on the one hand and Chinalco on the other - that's the truth of it."

Trade Minister Simon Crean said the deal's collapse would not harm Australia's trade relationship with China. However, he said it was important to pursue a free trade agreement that better clarified investment relations.

The Coalition yesterday welcomed the collapse of the deal, saying it had not been in Australia's interests.

Ethnic · Post by **Ethnic** » Sat Jun 06, 2009 10:10 am

Thank God for that!

Jovial Monk · Post by **Jovial Monk** » Sat Jun 06, 2009 1:05 pm

And it didn't happen just by chance either, bet that was Swannee behind the scenes.

Could not just say 'No' to the deal, a big company collapse would not be good right now.

JW Frogen · Post by **JW Frogen** » Sat Jun 06, 2009 3:14 pm

Shove that up your Won Tons you Tienaman Square killing yellow running dogs!

OOOOOOOOOOOOOOOOOOOOOO YAAAAAAAAAAAAAAAAAAAA!

JW Frogen · Post by **JW Frogen** » Sat Jun 06, 2009 3:15 pm

When my company gets bought up by a totalitarian Chinese front company I will regret that post, but not now.

OOOOOOOOOOOOOOOOOOOO YAAAAAAAAAAAAAAAA!

Leftofcentresalterego · Post by **Leftofcentresalterego** » Sat Jun 06, 2009 6:30 pm

I'll eat my hat if JM isn't right - any money says Swanny and Rudd er, let's say "leaned on" the situation.

The Chinese aren't going to like this. This will more or less make Australia to iron ore what Saudi Arabia is to oil. But hey!, they manipulate their currency and use near slave labour to gain a hugely unfair trade advantage. Too bad for them I say.

I have always thought it a bit iffy that despite all the claims that Chinese corporations are independent, at the end of the day when push really comes to shove, their boards ultimately anwer to their owner - the Chinese communist party.

Leftofcentresalterego · Post by **Leftofcentresalterego** » Sat Jun 06, 2009 6:35 pm

The reduction in Rio's debt burden is good news for my town as well. Half the jobs in this place are with Rio. With luck, that will prevent further job losses - there have been so many already.

Leftofcentresalterego · Post by **Leftofcentresalterego** » Sat Jun 06, 2009 6:40 pm

Shove that up your wontons you Tienaman square killing yellow running dogs

When my company gets bought up by a totallarian Chinese front company I will regret that post but not now

I have submitted your email address to the Chinese politbureau

Office Of The Prime Minister · Post by **Office Of The Prime Minister** » Sat Jun 06, 2009 6:46 pm

Leftofcentresalterego wrote:
Shove that up your wontons you Tienaman square killing yellow running dogs

When my company gets bought up by a totallarian Chinese front company I will regret that post but not now
I have submitted your email address to the Chinese politbureau

We thank you for your email dated 6 June 2009.

Please be assured Chairman Rudd will give it his full attention

Yours insincerely

Jo Li FitzGiboon
Secretary
People's Republic of Australia

JW Frogen · Post by **JW Frogen** » Sun Jun 07, 2009 3:19 pm

Leftofcentresalterego wrote:
I have submitted your email address to the Chinese politbureau

Can you add an order of King Prawns with that?

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