The Australian Competition and Consumer Commission (ACCC) will announce on July 22 its findings on a proposal by BHP Billiton Ltd and Rio Tinto Group to combine Western Australia iron ore operations, the regulator said on its Web site.
Both companies this month responded to information requests from the ACCC after the regulator delayed announcing its findings from May 27.
Rio and BHP, the world’s second and third-largest iron ore exporters, propose combining Australian operations in a 50-50 venture to save at least US$10 billion in costs.
Some European and Asian steelmakers oppose the plan on concern it might reduce competition in the iron ore market.
The venture, agreed to in June last year, will also be reviewed by the European Commission and requires shareholder approval as well.
Besides regulatory hurdles, higher iron ore prices since the announcement and Australia’s proposed 40 percent tax on mining profits may alter the deal, analysts say.
Under the proposed terms, BHP agreed to pay Rio US$5.8 billion to equalize its contribution of assets to the venture.
JPMorgan Chase & Co said in a March report that Rio could ask for between US$7.5 billion to US$9.8 billion based on higher iron ore price estimates.
“The fundamentals of putting the two businesses together are still there,” UBS AG analyst Glyn Lawcock said yesterday by phone. “The joint venture is the biggest project for both companies with the biggest upside potential, compared with other project options.”
The combined value of the entity is estimated at about US$135 billion, Lawcock said.
Since Australia’s government announced its tax proposal on mining profits, Rio Tinto and BHP Billiton have campaigned against the levy and want the government to exclude existing projects and reconsider the rate.
“Uncertainty revolving around the resources tax has made the tie-up less palatable,” ANZ Banking Group Ltd Senior Commodity Strategist Mark Pervan said by phone. “Valuation parameters would have changed.”
The tax is due to start in 2012, with legislation to be put to parliament late next year if the center-left government is re-elected at a national ballot due by April next year.
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