Rio Tinto joins hands with BHP as Chinalco deal crumbles

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Sydney: Leading iron ore producers Rio Tinto and BHP Billiton are to set up a 50-50 joint venture to combine their iron ore assets for both companies’ Western Australian iron ore assets - excluding  HIsmelt, and any secondary processing facilities. BHP  is to pay Rio Tinto $5.8bn for a 5% increase in its financial stake in the venture to 50% and the production and  development synergies from the jv are expected to bring about savings in excess of $10bn.
BHP Billiton CEO Marius Kloppers said, “The synergies in this combination are so substantial that both companies have been investigating ways to combine these operations for more than a decade. This joint venture brings together world-class iron ore resources, infrastructure and people, unlocks large synergies and is an outstanding outcome for all stakeholders.”
This move comes as Rio Tinto’s long heralded $19.5bn deal with Chinalco fell apart following a failure to agree upon revised terms on a convertible bond. The Chinese metal producer was to double its 9% stake in the ore giant’s assets in exchange for the funds.  [05/06/09]