Rio says no 'final decisions' over troubled iron ore merger
Mining giant Rio Tinto Wednesday denied making any "final decisions" on its controversial iron ore merger with BHP Billiton, as the massive deal appeared on the brink of collapse.
Rio conceded "potential obstacles" had been raised by Japan, South Korea, Australia and the European Commission, after Australian media said the tie-up between two of the world's top producers was set to be scrapped.
"The Rio Tinto board has not made any final decisions about possible outcomes or next steps relating to the proposed Rio Tinto/BHP Billiton iron ore production joint venture in Western Australia," Rio said in a statement.
Plans to combine operations in Western Australia, a major source of iron ore for Asia's steel mills, have roused anti-competition concerns among customers including China, the world's leading consumer.
Rio said Japan and South Korea had both flagged problems in interim reports, while possible objections had also come up in discussions with Australia and the European Commission.
"The board acknowledged recent communications from regulators that indicate potential obstacles to achieving clearance for the joint venture," Rio said.
The statement follows a report in Wednesday's Fairfax newspapers, citing sources close to Rio's board, which said the company was poised to walk away from the joint venture.
"They (BHP) can't object to that (decision)," Rio chairman Jan du Plessis was quoted as telling fellow directors.
"That's kind of us stating our investment preference. They will no doubt have their own measurements and I think that's fine."
The report said Rio now opposed the deal because of its improving financial performance and objections from shareholders, as well as a feeling that its terms favoured BHP.
The Anglo-Australian companies have already asked Australian regulators for more time to speak to foreign officials, prompting speculation the scheme will miss its end-2010 deadline or be scrapped altogether.
The joint venture was announced at the height of the financial crisis in June 2009, as Rio struggled with large debts after its takeover of Canadian aluminium group Alcan.
The merger, expected to save the companies 10 billion US dollars by sharing costs, was unveiled along with a 15 billion US dollar rights issue as Rio snubbed a 19.5 billion cash injection from its main shareholder, Chinalco.
However, rocketing iron ore prices and China's success in shrugging off the crisis have helped both Rio and BHP to bumper profits, making the tie-up less attractive.
Both companies' shares rose strongly after the latest news, with Rio up 2.26 percent at 78.74 Australian dollars and BHP 1.87 percent stronger at 40.24.
© 2010 AFP