Rio-BHP team up for mining venture

With Rio Tinto and BHP Billiton joining hands for developing Western Australia's Pilbara mines, the Australian mining industry is likely to undergo tremendous change, creating the single biggest iron ore exporter in the world.

The new deal brings together all Rio's (200 million tonnes a year) and BHP's (130 million tonnes a year) resources, consolidating Australia's mining sector.

The Australian miner yesterday terminated its $19.5-billion planned deal with Chinese resources giant Chinalco, opting instead to raise $US15.2 billion from existing shareholders, and to enter into a new iron ore deal with its arch rival BHP, which will now pay Rio $US5.8 billion. (See: Rio terminates Chinalco deal; to raise $15.2 billion through rights issue).

BHP and Rio have long been bitter rivals, with Rio spending most of last year fighting off a hostile takeover bid from the bigger company. Last year Rio had rejected BHP's original three-for-one all-stock offer made on November 8 as it "undervalued" its mines and growth prospects. (See: Rio Tinto rejects BHP's revised offer of $147 billion).

Rio managing director Tom Albanese said in Melbourne yesterday that the decision to walk away from the Chinalco deal was because it had become less commercially attractive.

"We have seen a significant rally in financial markets, a significant improvement in financial liquidity and a significant improvement in our share price," he said.