Regal Group International has been informed that the highly controversial joint venture between mining giants Rio Tinto and BHP Billiton may be dead. Neither company is at this stage prepared to deny or confirm this. An Australian newspaper, quoting from comments made by a leak from the Rio Tinto boardroom said that Rio Tinto is calling off the US$ 120 billion deal.
After the recent Rio Tinto board meeting the firm said it "acknowledged recent communications from regulators that indicate potential obstacles to achieving clearance for the joint venture," however the company emphasized to Regal Group International sources that "the Rio Tinto board has not made any final decisions about possible outcomes."
The joint venture, which would be Australia’s largest merger to date, would see the business valued at $116 billion and was expected to save the world’s second and third largest mining firms around $10 billion through cost sharing on the project, while Rio Tinto with the bigger Pilbara operation would have earned $5.8bn from BHP to equalize their holding.
Regal Group International has learned that the newspaper report indicated that in addition to the numerous regulatory issues surrounding the deal, Rio Tinto had begun to question whether the joint venture with BHP was still the correct direction for the company financially.
The agreement with BHP was reached in mid-2009 when Rio was desperate for cash and was seeking to reduce its $39 billion debt after its acquisition of Canadian aluminum group Alcan. A significant improvement in commodity markets, a $15 billion rights issue and disposals have seen the mining giant cut its debt by more than half, putting it in a position, according to Regal Group International analysts where it no longer needs the $5.8 billion BHP equalization to rebalance its ledger.
Regal Group International is a full service commodity trading advisory offering services to traders ranging from the beginner, with no experience in the markets at all, to the advanced trader who is looking for an avenue to place fast efficient orders.