Mining giant Rio Tinto is considering joint ventures with BHP Billiton as an alternative to the proposed merger of the two companies, the Daily Telegraph said on Tuesday. BHP, which Nov. 8 made a $122 billion three-for-one share offer for Rio (full story), already has several joint ventures with the third-ranked miner, including the Escondida copper mine in Chile. Rio has a preliminary defense plan to be unveiled next Monday called Project Manchester that will highlight both its own undervalued share price after its acquisition of aluminum miner Alcan and its strong pipeline, and Rio's contention that BHP stock is overvalued. As an alternative to a merger, Rio would be offer BHP further tie-ups like Pilbara, in Australia, where both companies have separate iron ore mining reserves and operations. BHP CEO Marius Kloppers told Reuters a merger could mean $3.7 billion in annual savings after seven years through synergies in iron ore, coal and other activities. The International Iron and Steel Institute said a combination of Rio and BHP would create a "virtual monopoly." A combined BHP and Rio would have a 38% market share in the global seaborne iron ore trade, similar to the market position of Brazil's CVRD.
Commentary: Steel's the Deal for BHP and RIO • Chinese Worried about BHP Billiton/Rio Tinto Deal • UBS Anticipates Higher Offer From BHP Billiton For Rio Tinto
Stocks to watch: RTP, BHP. Competitors: RIO, AAUK, AA. ETFs: SLX, ADRA
Earnings call transcript: BHP Billiton Ltd. Annual Fiscal 2007
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