...another article of interest from The Australian.
Andrew Burrell and Paige Taylor From: The Australian February 26, 2010
Stalemate for BHP Billiton and Rio Tinto
RELATIONS between the West Australian government and BHP Billiton and Rio Tinto have broken down over the miners' proposed Pilbara iron ore alliance, with Premier Colin Barnett accusing the companies of ignoring the state's demands.
Mr Barnett said yesterday companies, including BHP and Rio, were "getting away with murder" by paying low royalty rates as he intensified his bid to slug the miners with additional royalties worth about $300 million a year as a condition of the merger.
The Australian has learnt that Mr Barnett has not held a meeting to discuss the issue with BHP chief executive Marius Kloppers or anyone from Rio since talks in Perth on November 10 last year -- more than 15 weeks ago.
This is despite Mr Barnett's announcement last year that he had agreed to meet BHP and Rio every eight weeks in a bid to reach a deal to allow scores of state mining agreements to be amended, which is needed to allow the $US116bn ($131bn) alliance to proceed at an operational level.
WA government sources suggested yesterday that the breakdown in communications in recent months would exacerbate the difficulties in reaching an agreement. Mr Barnett said yesterday the companies were more focused on gaining approvals from foreign regulators rather than hammering out a deal with WA. "The companies are not engaging with government at the moment, which I think is a strange tactic on their part," he said.
"As I've pointed out to both BHP and Rio, while you may eventually get regulatory approval you have to deal with the state of Western Australia because the state of Western Australia owns the iron ore."
BHP and Rio, whose alliance faces regulatory hurdles in Europe, both declined to comment on Mr Barnett's stance.
Earlier this month, a frustrated Mr Barnett said he had given BHP and Rio a deadline of July 1 to begin paying extra royalties on their Pilbara iron ore mines, even though the completion date of the joint venture is likely to drag on beyond that date. But the Premier says the miners have failed to come back to him on the proposed July 1 date.
Mr Barnett wants to use the iron ore alliance to end the concessional royalties long enjoyed by BHP and Rio in the Pilbara.
This means the 3.75 per cent royalty rate applied in the 1960s to encourage companies to build infrastructure would be lifted to 5.625 per cent, which applies to all recent iron ore projects in WA.
Mr Barnett has also signalled that he wants to force the miners to pay up to $1bn in stamp duty on the Pilbara tie-up, although he has conceded that regulators would decide whether the deal triggered a change of ownership.
The Premier accused the miners last year of presenting the deal as a joint venture, rather than as a merger or a partnership, to avoid paying state stamp duty. He also wants to force the companies to open up their rail infrastructure to third-party haulage access.
In parliament yesterday, Mr Barnett faced questions over the BHP-Rio merger and speculation the government was preparing to raise royalty rates across the board for the mining industry.
"A number of people who work in the mining industry have come up to me over the summer break and said, `By the way, Colin, mining companies are getting away with murder, they're not paying enough'," he said. The WA government has promised to fight any attempt by Canberra to take control of state mining royalties.
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Government and Legal decisions over the next few months will go a long way in determining the future development strategies of BRM and other juniors as well as WAs IO industry as a whole.
BRM Price at posting:
$3.11 Sentiment: None Disclosure: Held
