Heat Treat Industry News
November 30, 2009
BHP dismisses reports ore venture is in trouble
BHP Billiton on Thursday brushed aside reports its proposed US$116bn Western Australian iron ore joint venture with Rio Tinto was in difficulty only weeks ahead of a deadline for the mining groups to conclude a “definitive agreement”.
Rio Tinto’s financial position has improved markedly in the five months since it struck the production joint venture with its arch-rival and former hostile suitor and there are concerns the London-based group should be better compensated for pooling its superior iron ore infrastructure assets with those of BHP.
Don Argus, outgoing BHP chairman, told the group’s annual meeting in Brisbane that executives at the top of both mining groups were committed to the deal.
“There is commentary … of people not being supportive of it, but that is not the case from within both parties and it is certainly not the case from the majority of shareholders,” Mr Argus said. “This just makes sense.”
The mining groups estimate the joint venture will save at least US$10bn in production and development synergies.
Rio Tinto has said the mining groups plan to convert their in-principle agreement into a binding deal by December 5.
However, Marius Kloppers, BHP chief executive, said on Thursday that although Rio had put out a date “we have always just said towards the end of the year and I see no reason to update that”.
He added that the core principles were yet to be completed and some additions would be made.
BHP also told shareholders that market conditions had improved in the month since it held its annual meeting in London. “The velocity of the recovery in China has indeed been surprising,” Mr Kloppers said.
He added that the resilience of the Chinese steel sector had also been a surprise.
However, he cautioned that he expected BHP to emerge from the downturn “less strongly than in previous cycles”.
Those comments came as BHP entered late-stage talks to sell its Ravensthorpe nickel operation in Western Australia, which it mothballed this year leading to the loss of close to 2,000 jobs.
A number of parties are thought to have submitted final-round offers for Ravensthorpe, with a consortium that includes China Metallurgical Group and Minara Resources, the Australian group majority-owned by Switzerland’s Glencore, said to be in a strong position.
Ravensthorpe, which cost US$2.1bn to build, hit trouble late last year after nickel prices collapsed. BHP has written down the investment to nil and reports have suggested it wants a sale price of about A$500m
Mr Kloppers said a decision about what to do with Ravensthorpe would be made before the end of next month.
“Broadly, there are two scenarios for us: we can restart it or we can sell it,” Mr Kloppers said.
“I can assure you that the process that we have run over the last six months or so is essentially complete.”
BHP hired Bank of America-Merrill Lynch in August to run the auction, which has also attracted interest from Australia’s Poseidon Nickel and First Quantum, a Canadian copper miner.
BHP shares rose 61 cents to A$41.80 by the Sydney close.
Copyright The Financial Times Limited 2009. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
By Peter Smith in Sydney - Published: November 26 2009 08:27
SOURCE: FT.COM/FINANCIAL TIMES
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