BHP Billiton and Rio Tinto will now look to secure the approvals of international regulators after the companies officially signed a binding agreement for their US$116 billion iron ore joint venture over the weekend.
The miners announced that they signed an agreement last Saturday covering all aspects of the proposed deal that will see them combine their iron ore resources, as well as their port and rail infrastructure in Western Australia’s Pilbara region.
BHP and Rio have said that they hope to have the single entity company up and running in the second half of 2010.
The deal was originally announced in the middle of the year after BHP abandoned its original hostile bid for Rio at the end of 2008.
The binding agreement signed on Saturday came within four hours of the deadline both companies set when the deal was first flagged.
BHP and Rio have said that combining their assets will ultimately save the two companies up to US$10 billion in production and development costs.
“We are very pleased to now have formal and binding agreements in place to develop this important joint venture,” BHP chief executive Marius Kloppers said.
“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.”
The primary hurdle now left for the two companies is clearing the deal with national regulators, including the Australian Competition and Consumer Commission (ACCC) and the European Commission (EC).
The companies said they have already filed submissions with both the ACCC and the EC, with similar documentation expected to be submitted to regulators in China and Japan by the end of the year.
The joint venture has raised questions of anti-competition in the iron ore market, with several nations expressing concerns over the notion of BHP and Rio being responsible for up to one-third of the world’s seaborne iron ore exports and being able to combine their extensive knowledge of international volume and demand.
Chinese steel makers have been particularly vocal in saying that the tie up will give the two companies too much power in the market.
BHP and Rio are two of the three largest iron ore producers in the world, along with Brazil’s Vale.
The joint venture will initially bring together a total of 260 million tonnes of iron ore, with BHP making a US$5.8 billion equalisation payment to establish it as a 50:50 partnership.