BHP-Rio Tinto Joint Venture 'Dead in the Water'

Includes: BHP, RIO, VALE
by: Wildebeest

Reports were coming out of Australia yesterday that the BHP Rio Tinto (RTP) iron ore joint venture will not get regulatory approval. The article quotes one "senior mining executive involved in the discussions with regulators" as saying

It's dead and the coffin's being lowered into the ground. It's a matter of finding a face-saving way out in the coming few months.

The proposed joint venture of the two companies' iron ore operations in the Pilbara region of Australia was forecast to produce 10 billion in cost savings. The failure to obtain the approval of regulators in several jurisdictions, if that is what eventuates, is a blow to both companies. While I understand concerns about the strength of these miners in the iron ore sector and the potential for monopolistic behavior, the reality is that along with Vale (NYSE:VALE), the big three producers dominate the market and in the current environment seemingly have steel mills at their mercy. I'm not sure I see any difference for the steel mills if there is a big 3 or a big 2.

The full story in the Australian press can be found here.

Disclosure: Long BHP

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