Australia ups royalty demand, threatening iron-ore merger
- Source: Global Times
- [04:55 November 13 2009]
- Comments
Western Australia state has raised the stakes in its demand for higher royalties from iron ore miners Rio Tinto and BHP Billiton, telling them that it would not rubber-stamp their planned iron ore merger.
Western Australia Premier Colin Barnett told the chiefs of both firms in a meeting this week he wanted to double their royalties to put them on par with other miners, Australian newspapers said Thursday.
Barnett said both CEOs "drew breath" upon the remark, but they made no concessions.
Rio Tinto and BHP Billiton, the world's second and third-largest iron ore miners respectively, announced in June a plan to merge their Australian iron ore operations, all based in the west, in a joint venture valued at the time at $116 billion.
The plan is already under fire from steel companies that rely on ore from both companies, which fear it will create an Australian oligopoly capable of unfairly influencing worldwide pricing and supply.
The plan needs a series of government approvals, including new legislation in Western Australia state.
Under agreements dating back to the 1960s, both companies pay the state a royalty rate of 3.75 percent, half of that paid by other miners, in recognition of their contributions to early development of the state's iron-ore industry, based in the arid Pilbara region.
"I don't believe that anyone can argue today that BHP and Rio ... should pay half the royalty rate of small Australian companies," Barnett said.
Reuters
