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Australia raises concerns about BHP-Rio iron-ore tie-up
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25th March 2010
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PERTH (miningweekly.com) – The Australian Competition & Consumer Commission (ACCC) on Thursday raised concerns about the proposed iron-ore joint venture (JV) between diversified giants Rio Tinto and BHP Billiton.

The two mining companies plan to jointly develop their Pilbara iron-ore projects.

This comes as Australia’s only significant iron-ore purchaser, BlueScope Steel, has publicly raised concerns about the proposed JV, and possible changes to the expansion plans of existing and potential competitors of the proposed JV entity.

The ACCC, which issued a ‘statement of issues’ said that it would investigate if the proposed JV would have the ability and incentive to profitably withhold supply from iron-ore market.

The next stage of inquiries would also look at whether the JV entity and Brazil’s Vale would have an increased ability and incentive to coordinate their supply decisions and whether competitors were in a position to constrain these effects.

Vale is the world's largest producer of iron-ore and would be the proposed JV's main competitor.

The ACCC has invited further market submissions by April 14. It would make an announcement of its findings on April 28.

The commission had been set to make its finding known by February 24, but had delayed an announcement after it requested further information from the JV parties.

Rio said on Thursday that it would continue to fully cooperate with the ACCC and other regulators, and considered the latest request for market submission as "part of the regulatory process".

In June 2009, BHP Billiton and Rio Tinto signed a nonbinding agreement to establish the JV, which would encompass all current and future Western Australian iron-ore assets and liabilities, with BHP expected to pay Rio $5,8-billion to take its interest in the JV to 50%.

The companies abandoned a plan to jointly market the iron-ore from the JV. An initial agreement detailed that up to 15% of production would have been sold by the JV, independent of Rio Tinto and BHP Billiton.

Edited by: Mariaan Webb

 

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