Rio and BHP committed to merger

Rio Tinto and BHP Billiton have announced their commitment to the Pilbara Iron Ore joint venture despite the new resources tax.

BHP chief executive Marius Kloppers told the Wall Street Journal that in a recent meeting with Rio head Tom Albanese, the two miners reaffirmed their intention to meet the 31 December deadline for the joint venture.

Under the agreement, the two will join their iron ore projects and infrastructure in the Pilbara region, with BHP paying Rio an additional US$5.8 billion as Rio will contribute more iron ore to the venture.

However, if negotiations are not agreed upon by the December deadline, either party has the option to walk away.

If this occurs, then a break fee of US$275 million will be incurred.

The merger has seen fierce opposition from steel mills in Europe and Asia; however, industry players believe that the deal is still likely to be approved by regulators in Europe, Japan and Korea despite the opposition.

The asset merger has been valued at US$116 billion, making it the largest Australian company after BHP Billiton itself.