barnett may yet be a saviour, page-4

More and more I'm thinking Barnett could be our man.

Age Tuesday:

Barnett threatens heat on BHP, Rio
Barry FitzGerald
June 9, 2009

WEST Australian premier Colin Barnett has warned Rio Tinto and BHP Billiton they need to remember that the WA Government - on behalf of the people - owns the Pilbara iron riches that the mining titans plan to throw together in a $US115 billion ($A145 billion) 50:50 joint venture.

In a toughening of his stance for the formation of the joint venture to be a trigger for WA to extract a "new deal" from the mining heavyweights, Mr Barnett said he would seek assurances on jobs, (royalty) taxation and the sharing of infrastructure.

"The companies are talking about saving $US10 billion (from synergies), well that implies to me a lot of job losses," Mr Barnett told ABC radio.

He raised the prospect that the combination of the two companies' operations meant that job opportunities for West Australians now and into the future would be "extinguished".

Rio employs 10,000 workers in the Pilbara and BHP 10,800.

In briefings on the proposed combination, BHP and Rio have stopped short of specifying job cuts. BHP chief executive Marius Kloppers has argued that job losses are not an issue.

He said the focus of the joint venture would continue to be what it had been for the individual companies in recent years - "very large job growth on a very sustainable set of investments for many years".

Mr Barnett repeated a claim that the deal looked to have been structured in a way to avoid as much as $1 billion in stamp duty. "I take that very seriously and we are seeking today both legal and Treasury advice on that," he said.

Mr Barnett also repeated that the state could use the formation of the joint venture to extract higher royalty payments from Rio and BHP.

"The days of selling iron ore (at) basically half-price to the two big companies, as far as I'm concerned, are finished," Mr Barnett said.

The Government's leverage in the looming showdown with Rio and BHP is based on their Pilbara operations being covered by 20 state agreements, some of which date back to the 1960s and 1970s.

"For them to integrate/combine their iron ore operations, I would think it's self-evident that there's going to have to be major changes or agreements within those agreements," Mr Barnett said.

"The companies do not have freedom or the right to simply go ahead and make these changes.

"It's not their land, it's not their iron ore, they don't have that jurisdiction."

Meanwhile, Deutsche Bank's equities desk said the $US21 billion cash injection into Rio from its BHP deal and its planned rights issue would move Rio's gearing from an uncomfortable high of 63 per cent to 28 per cent.

"While we forecast the net debt position to continue to decline, we believe that it is likely that the company will ramp its capital expenditure program back up," the broker said. Rio slashed its capital expenditure budget before it secured a refinancing deal.

Key point here is his repeated comment about "shared infrastructure" being something he would want agreed as part of the whole taxation-access-ownership equation.