26 Jan 2010

EC to probe BHP-Rio joint venture

6:03 am on 26 January 2010

The European Commission is starting a formal probe into an iron ore venture between Rio Tinto and BHP Billiton.

Rio, the world's second largest miner, and BHP, the number three, plan to share their vast ore assets in Western Australia.

The BBC reports Brussels fears the deal could give the companies a dominant position in the iron ore market.

The proposed joint venture is estimated to be worth $US116 billion.

The European Commission said the case would proceed "as a matter of high priority". Rio said the investigation was not unexpected given the size of the proposed joint venture.

The two companies agreed on the joint venture following a hostile takeover bid for Rio by BHP, which was dropped in November 2008 amid global economic turmoil.

An earlier $US19.5 billion bid for Rio by Chinese state-owned firm Chinalco collapsed when the two failed to agree terms.

China's giant steel industry opposes the joint venture, fearing it would push up prices.

Chinese authorities arrested four Rio Tinto employees in China in July and have charged them with spying after negotiations over iron ore prices.

The World Steel Association and Eurofer, a lobbying group for European steelmakers, have both criticised the proposed joint venture.