IP/10/45

Brussels, 25 th January 2010

Antitrust: Commission opens formal proceedings concerning iron ore production joint venture between BHP Billiton and Rio Tinto

The European Commission has opened a formal antitrust investigation into Anglo-Australian mining companies Rio Tinto and BHP Billiton under the EU rules on restrictive business practices (Article 101 of the Treaty on the Functioning of the European Union - TFEU). Rio Tinto and BHP Billiton are respectively the second and third largest producers of iron ore in the world. The proposed joint venture between Rio Tinto and BHP Billiton would combine the parties' iron ore assets in Western Australia. The Commission will in particular examine the effects of the proposed joint venture on the worldwide market for iron ore transported by sea (so-called "seaborne iron ore").

Opening of proceedings does not imply that the Commission has conclusive evidence of an infringement but merely that the Commission will investigate the case as a matter of priority.

There is no binding deadline to complete inquiries into anticompetitive conduct. Their duration depends on a number of factors, including the complexity of the case, cooperation from the undertakings concerned and exercise of the rights of defence.

Why has the Commission opened proceedings?

The proceedings concern the agreement signed on 5 December 2009 between BHP Billiton and Rio Tinto to establish a production joint venture covering the entirety of both companies' Western Australian iron ore assets. The Commission will in particular examine whether the joint venture would have a negative effect on competition on the worldwide market for seaborne iron ore.

Iron ore is the main component of steel. Virtually all iron ore mined worldwide is used in steel production. In turn, steel is a key element for the automotive, construction and consumer goods industries. Iron ore is sold in various forms, as finely grained ore (concentrates, fines) and in larger pieces (lumps and pellets). Worldwide iron ore consumption is now picking up again following a slowdown as a result of the economic and financial crisis, and is forecast to grow steadily in the coming years. Three companies, Vale of Brazil, Rio Tinto and BHP Billiton account for most of the iron ore sold worldwide on a seaborne basis.

In 2008, the Commission examined under the EU Merger Regulation the full acquisition of Rio Tinto by BHP Billiton. The transaction was abandoned by BHP Billiton on 26 November 2008 (see IP/08/1798 ).

The current investigation, based on Article 101 TFEU, concerns a different operation as the agreement between the parties now focuses on the establishment of a joint venture for iron ore production, leaving the marketing activities of the companies separate.

What is the legal basis for the decision?

The legal basis for this procedural step is Article 2(1) of Commission Regulation No 773/2004 and Article 11(6) of Council Regulation No 1/2003.

Article 2(1) of Regulation No 773/2004 provides that the Commission can initiate proceedings with a view to adopting at a later stage a decision on substance according to Articles 7-10 of Regulation No 1/2003 at any point in time, but at the latest when issuing a statement of objections or a preliminary assessment notice in a settlement procedure. In the case at stake, the Commission has chosen to open proceedings before such further steps.

Article 11(6) of Regulation No 1/2003 provides that the initiation of proceedings relieves the competition authorities of the Member States of their authority to apply the competition rules laid down in Articles 101 and 102 of the TFEU. Article 16(1) of the same Regulation provides that national courts must avoid giving decisions which would conflict with a decision contemplated by the Commission in proceedings that it has initiated.

The Commission may make public the initiation of proceedings in any appropriate way. Before doing so, it informs the parties concerned. The Competition Authorities of the Member States concerned have also been informed.

The companies' rights of defence will be fully respected.

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2009/6/6 　中国アルミのRio Tinto への出資 取り止め

6月5日、Rio Tinto は中国アルミの出資取り止めと、これに伴う資金不足対策として２つの対策を発表した。

一つはRio Tinto と BHP Billiton の西豪州の鉄鉱石事業の50/50 JV化で、シェア調整のためBHP Billiton から58億ドルを受け取る。

もう一つは株主割当増資で、英国法人が118億ドル、豪州法人が34億ドル、合計152億ドルとなる。

鉄鉱石事業のJV化

Rio Tinto と BHP Billiton は2009年6月5日、両社の西豪州の鉄鉱石資産を包含する製造JVの設立の契約に調印した。

両社50/50出資のJVは、両社の現在及び将来の西豪州の鉄鉱石資産及び負債を引継ぐ。
BHP Billiton の資産の比率は45%であるため、50/50JVにするために、BHP Billiton はRio Tinto に58億米ドルを支払う。

JV化は次のメリットがあり、シナジー効果は100億米ドルを超えるとみられている。
・隣接する鉱山の統合
・鉄道輸送費削減、港の効率化
・ブレンドすることによるメリット
・開発計画の統合、大規模化、資金の効率利用
・経営、購買、管理費の節約

JVは製造JVで、鉱石をコストで両社に等量を引き渡し、両社はそれぞれ独自に販売する。
技術とR&D活動もJVにプールされる。

但し、HIsmelt （銑鉄プラント）や二次処理設備、西豪州以外での現在及び将来の事業展開はJVから除外される。

Rio Tinto の会長は、JVはワールドクラスの資産、インフラを持つ圧倒的な鉄鉱石事業となるとしている。

必要な承認を得て発足するが、どちらかが取り止めた場合は、違約金275.5 百万米ドルを支払う。

2007年にBHP Billiton がRio Tinto に対して買収の提案を行い、2008年11月にBHP Billiton が買収を諦めたが、買収の主な目的は西豪州の鉄鉱石であったと言われる。
最終的にBHP Billiton の構想が一部実現したこととなる。

2008/11/27　BHP Billiton、Rio Tinto 買収を断念　

注　下の鉄鉱石能力グラフで、BHPB-Pilbara、Rio-Hamersley、Rio-Robe はいずれも西豪州のPilbara 地区にある鉱山。
統合でCVRD（ブラジルのリオドセ）を追い抜く。

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05 December 2009

Rio Tinto and BHP Billiton sign binding agreements on iron ore production joint venture

On 5 June 2009, Rio Tinto and BHP Billiton signed an agreement of core principles to establish a production joint venture covering the entirety of both companies' Western Australian iron ore assets. The companies today signed binding agreements on the proposed JV that cover all aspects of how the joint venture will operate and be governed.

The companies have also filed submissions with the European Commission and the Australian Competition and Consumer Commission in relation to the proposed production joint venture and expect to submit filings in other relevant jurisdictions shortly. The companies understand that the European Commission will review the production joint venture under Article 101 (formerly Article 81).  Taking into account all regulatory review processes and shareholder approvals, Rio Tinto and BHP Billiton anticipate completion of the JV in the second half of calendar year 2010

The production joint venture encompasses all current and future Western Australian iron ore assets and liabilities and will be owned 50:50 by Rio Tinto and BHP Billiton.  It will deliver substantial synergies resulting from combining the companies’ Western Australian iron ore operations, with the aim of producing more iron ore at lower cost.  Rio Tinto and BHP Billiton believe the net present value of these unique production and development synergies will be in excess of US$10 billion (100 per cent basis).  As previously outlined, these synergies are anticipated to come from:

・ Combining adjacent mines into single operations;
・ Reducing costs through shorter rail hauls and more efficient allocations of port capacity;
・ Blending opportunities which will maximise product recovery and provide further operating efficiencies;
・ Optimising future growth opportunities through the development of consolidated, larger and more capital efficient expansion projects;
・ Combining the management, procurement and general overhead activities into a single entity.

Tom Albanese, chief executive, Rio Tinto, said, “Signing binding agreements brings us one step closer to unlocking the full production potential of our Pilbara iron ore assets and achieving substantial benefits for all our stakeholders. Completing the joint venture is a priority for Rio Tinto in 2010 and I look forward to realising this vision and capturing the synergies for our shareholders.”

BHP Billiton CEO, Marius Kloppers, said, “We are very pleased to now have formal and binding agreements in place to develop this important joint venture.  With the history of both companies’ attempts to join together these two world-class iron ore operations in WA at various times, this deal has effectively been more than a decade in the making.  It is an important milestone towards delivering substantial additional benefits to both sets of shareholders, and to the shareholders of our respective joint venture partners in the Pilbara.”

On 15 October 2009, Rio Tinto and BHP Billiton announced that the partners would not proceed with any joint venture marketing activity. This is the only material change to the non-binding core principles agreement signed on 5 June 2009. The production joint venture will deliver all its iron ore output to Rio Tinto and BHP Billiton to sell independently through their own marketing groups.

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15 October 2009

Rio Tinto and BHP Billiton update on proposed iron ore production joint venture

On 5 June 2009, Rio Tinto and BHP Billiton signed a non-binding agreement to establish a production joint venture covering the entirety of both companies' Western Australian iron ore assets.

Under the terms of the agreement up to 15 per cent of production was proposed to be sold by the joint venture, independent of Rio Tinto and BHP Billiton.
 
Following discussions between the two companies, Rio Tinto and BHP Billiton have decided not to proceed with the joint venture marketing activity. As a result, all production from the proposed joint venture would be marketed separately by Rio Tinto and BHP Billiton. 

The two companies believe that this change will clarify the nature of the JV for customers and emphasise its focus on realising significant production and development synergies.

Rio Tinto and BHP Billiton are pleased with progress towards definitive JV agreements and expect to finalise these agreements on schedule.