BHP-Rio deal faces court

The High Court will decide whether the US$116 billion Rio-BHP deal will attract stamp duty.

The High Court will decide this week whether or not the $US116 billion Rio Tinto — BHP Billiton Pilbara Iron Ore Alliance will attract stamp duty.

The dispute over whether mineral leases are considered ‘land’ will be heard by the High Court sitting in Brisbane.

According to reports, the case could be worth a minimum of $47.5 million because a lower court has already ruled in favour of the Commissioner of Territory Revenue.

The case could affect Rio’s proposed joint venture with BHP and other resource deals that might involve mineral leases.

The case’s precedent dates back to Alcan Alumina’s 2001 acquisition of Gove Aluminium, which has operations in the Northern Territory.

The $740m deal was structured so that Alcan bought 70% of Gove’s shares while Gove bought back 30% of its own shares.

The Commissioner of Territory Revenue investigated the deal and decided that the mineral leases and options to renew those leases were “land” for the purposes of the Taxation Act. Alcan was ordered to pay $47.5m, which included stamp duties and penalties.

Western Australia Premier Colin Barnett held emergency talks last week with both BHP’s CEO Marius Kloppers and Rio Tinto’s chief executive Sam Walsh regarding stamp duty.

“I made it very clear that if BHP is paying Rio Tinto US$5.8b for a share of Rio Tinto’s iron ore production we regard that as a change of ownership which would affectively receive stamp duty,” he said.

Barnett said he would not hesitate to reject the deal if the issue of stamp duty could not be resolved.

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