chinalco alcoa buy 12 percent stake in rio, page-101

EL

Thanks

I agree that there are good reasons for not combining RIO and BHP, and that the level of Australian ownership would fall when compared to where it currently is in BHP.

However, there are also sound reasons for a combined company in terms of market power, and to ensure that Australia has more control over its own assets and gets full value from its depletable resources.

If you know about the sorry history of our mining industry, it took off with our trade with Japan. At first Japan offered very good prices for our minerals to get the large mines going. In fact in real terms (after inflation) we have not since matched those prices in respect of iron ore. However, once that happened they simply developed mines on every other continent and used the different mines to compete the prices down to marginal cost of production. Korea then followed Japan's lead, and bought ores based on the lowest Japanese prices. In effect the long term value of cheap minerals was captured by our Asian "friends" for their own development and export generating industries. Now, finally there is some real competition for the resources from other countries and to a large degree the current prices better reflect the cost of depleting the more easily mined scarce resources (although some of this is due to temporary shortages caused by capacity constraint, and iron ore prices would fall if the massive magnetite deposits are developed).

I suppose that our own national fund could buy up some of the shares of the new combined company, particularly those listed overseas, and hold them as passive long term investment to generate income for meeting the government's (our) social welfare costs.

Its always good to debate things, and I hope all continues well with your investments.

loki