Mining giants Rio Tinto and BHP Billiton have struck a joint-venture deal over all of their Western Australian iron ore assets after the collapse of Rio’s proposed tie-up with Chinalco overnight. Under the preliminary agreement, Rio Tinto and BHP Billiton will each have a 50 per cent stake in the valuable WA operations. BHP will pay Rio almost $7.2 billion as part of the arrangement. The miners say the 50:50 joint venture will unlock $US10 billion in value.
See http://www.abc.net.au/news/stories/2009/06/05/2590189.htm.
The meaning of Rio Tinto’s capitulation
Transnational mining group Rio Tinto has finally capitulated to multiple pressures, in abandoning its posed near-USD 20bn deal with smaller rival Chinalco, in announcing a rights issue to raise the equivalent of USD 15.2bn, and agreeing a USD 116bn joint venture with BHP Billiton over the two companies’ West Australian iron ore assets.
Mineweb’s Barry Sergeant believes that “The capitulation is also final admission, albeit covert, that Rio Tinto’s 2007 gigantic USD 38bn cash acquisition of Alcan, trumping an earlier bid from Alcoa, comprises one of the most value-destructive transactions in the history of mining.”
See http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=84429&sn=Detail.