BHP-Rio joint venture comes together

Back in June, BHP Billiton and Rio Tinto signed an agreement of core principles to establish a production joint venture covering the entirety of both companies' Western Australian iron ore assets.
The companies signed binding agreements on the proposed JV that cover all aspects of how the joint venture will operate and be governed.
The companies have also filed submissions with the European Commission and the Australian Competition and Consumer Commission in relation to the proposed production joint venture and expect to submit filings in other relevant jurisdictions shortly.
Taking into account all regulatory review processes and shareholder approvals, BHP Billiton and Rio Tinto anticipate completion of the JV in the second half of calendar year 2010.
The production joint venture encompasses all current and future Western Australian iron ore assets and liabilities and will be owned 50:50 by BHP Billiton and Rio Tinto. It will deliver substantial synergies resulting from combining the companies' Western Australian iron ore operations, with the aim of producing more iron ore at lower cost.
BHP Billiton and Rio Tinto believe the net present value of these unique production and development synergies will be in excess of US$10 billion (100 per cent basis). As previously outlined, these synergies are anticipated to come from:
. combining adjacent mines into single operations;
. reducing costs through shorter rail hauls and more efficient allocations of port capacity;
. blending opportunities which will maximise product recovery and provide further operating efficiencies;
. optimising future growth opportunities through the development of consolidated, larger and more capital efficient expansion projects;
. combining the management, procurement and general overhead activities into a single entity.
BHP Billiton CEO, Marius Kloppers, said, "We are very pleased to now have formal and binding agreements in place to develop this important joint venture. With the history of both companies' attempts to join together these two world-class iron ore operations in Western Australia at various times, this deal has effectively been more than a decade in the making. It is an important milestone towards delivering substantial additional benefits to both sets of shareholders, and to the shareholders of our respective joint venture partners in the Pilbara."
Tom Albanese, chief executive, Rio Tinto, said, "Signing binding agreements brings us one step closer to unlocking the full production potential of our Pilbara iron ore assets and achieving substantial benefits for all our stakeholders. Completing the joint venture is a priority for Rio Tinto in 2010 and I look forward to realising this vision and capturing the synergies for our shareholders."