Mining giants Rio Tinto and BHP Billiton have struck a joint-venture deal over all of their Western Australian iron ore assets after the collapse of Rio's proposed tie-up with Chinalco overnight.
Under the preliminary agreement, Rio and BHP will each have a 50 per cent stake in the valuable WA operations.
BHP will pay Rio almost $7.2 billion as part of the arrangement.
The miners say the 50:50 joint venture will unlock $US10 billion in value.
It will see their adjacent mines merged into single operations and more efficient use of rail and port infrastructure.
BHP chief executive Billiton Marius Kloppers says they have been investigating ways to combine their operations for more than a decade.
"The synergies in this combination are so substantial that both companies have been investigating ways to combine these operations for more than a decade. I am delighted that we have found a solution that works for both companies," he said.
Rio's chairman Jan du Plessis says the combined businesses will serve growing international markets with unparalleled efficiency.
"The joint venture will establish an unrivalled iron ore business with world class assets and infrastructure. We believe it represents great value for shareholders," he said.
BHP's shares have surged more than 8 per cent, while Rio remains on a trading halt.
The deal comes after Rio walked away from its partnership with Chinalco, which faced shareholder and regulatory hurdles and became less attractive as the miner's share price rebounded.
The decision to abandon the Chinalco deal has been welcomed by Ian Melrose, an Australian businessman who has been funding a series of television advertisements opposing the deal.
"It's a good result I think for everyone. There will be a few potholes in the road as they move to finalising things and working out the deal," he said.
"But in the end it's better for Australia, it's probably better for China in the long run."
Source: ABC
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