The integration of rival mining giants BHP Billiton and Rio Tinto into a single entity would help to meet China's need for greater volumes of product to be delivered at a faster pace, BHP Billiton CEO Marius Kloppers said in Johannesburg on Saturday.

The volumes of raw materials that the combined company would supply far exceeded what BHP Billiton and Rio Tinto were able to achieve as two separate stand-alone entities," Kloppers told Mining Weekly Online.

This was because, in addition to conventional cost synergies - which in themselves would unlock $1,7-bilion a year in savings - additional volume growth from the combined asset base would spawn a second $2-billion-a-year "more-product, more-quickly" synergy set, which was "very important" to a world short of raw materials.

Supply volume across a range of products, including in iron ore, would grow and come available faster, making the transaction a "pro-customer" value proposition, as well as a share value enhancer.

"In reality the proposal is not for a takeover, but a combination of the two companies in such a way that the new entity has the same two sets of shareholders owning an asset that is more valuable in combined form than apart," Kloppers told Mining Weekly Online, after briefing South African BHP Billiton shareholders, which include Old Mutual, Public Investment Corporation, Industrial Development Corporation, Stanlib and Rand Merchant Bank.

Kloppers told Mining Weekly Online that more than half of the Rio Tinto shareholder base had already been briefed at meetings in London, Edinburgh, Sydney, Melbourne, the US east and west coasts and South Africa, with the two shareholdings overlapping by 60% to 70%.

BHP Billiton especially wanted its own shareholders as well as Rio Tinto shareholders to continue to be invested in the new combined entity.

On Rio Tinto shares currently trading at a premium following the BHP Billiton overture, Kloppers said that this was a result of the market believing that there was a high probability of a deal being consummated.

The scrip exchange ratio offered equated to a 28% uplift for the Rio Tinto share.

"We have done an immense amount of work on this deal over a long period with a large group of people and we believe that we have a compelling proposition, but we also believe that we have covered off and studied in depth all of the main issues around what is a very complex transaction, but one which we believe is very doable," Kloppers said.

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