Speculation is rife that Rio Tinto shareholders are set to reject the proposed Pilbara iron ore joint venture with BHP Billiton, because the deal no longer represents good value.
Brokerage firms RBS and Citi yesterday released reports that the shareholders would vote down the current arrangements unless a BHP payment to Rio is increased by up to $6.4 billion.
In order to form the $125 billion 50-50 joint venture, Rio would have to hand over a 5% of its Pilbara operations to BHP.
However, the shareholders now say that stake has substantially increased in value thanks to the improving iron ore market, since the two companies proposed the transaction in June last year.
The iron ore spot prices have doubled from the June 2009 mark to reach US$160 per tonne.
The current ‘equalisation’ payment for the 5% stake is estimated to be between $2.2 billion and $2.5 billion.
However, analysts believe the stake is now worth around $8.6 billion.
The joint venture would combine the mining giants’ Pilbara iron ore operations, ports and rail infrastructure.