Archive for January, 2011


Monday, January 31st, 2011

Hibernia GBS

How to build a sea platform that stands half the height of New York’s Empire State Building and 33 meters taller than the Calgary Tower.
Sourced & published by Henry Sapiecha


Monday, January 31st, 2011

Go for cash, investors tell Rio, BHP

Louise Armitstead
January 31, 2011

INSTITUTIONAL investors have written to BHP Billiton and Rio Tinto demanding that they ditch ambitions for ”wasteful mega-deals” and each embark on multibillion-pound share buyback schemes instead as speculation builds that BHP is lining up another big takeover target.

The shareholders, who have written individually, have asked for commitments from the boards of the mining companies that they use their strong balance sheets to return cash to investors.

The investors have moved to pre-empt deals in the mining sector that analysts and investment bankers have predicted.

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Some shareholders have told the companies they are prepared to move to vote down the re-election of key members of the board if they do not agree to the commitments.

On Friday, rumours swept the market that BHP was planning a bid for BG Group. Analysts at Exane BNP Paribas fanned the flames by saying that a takeover would allow BHP to revitalise its oil and gas arm.

BG has extensive interests in Australia following the 2008 acquisition of Origin Energy for $13 billion, and late last year announced plans to spend $15 billion developing an LNG project in Queensland.

In London trading, BG’s shares rose to £14.041 ($A22.38) valuing the company at £4.5 billion, while BHP shed 53p to £23.841.

Investors have been spooked by the rumours coming so soon after BHP’s disastrous $US40 billion hostile attempt to buy Potash, the Canadian giant.

The bid’s failure fed expectations that BHP would target the energy sector as its only viable expansion option.

One of BHP’s top 10 shareholders said: ”Frankly after the Potash debacle, we are not too enamoured with BHP’s bid ambitions. It was expensive and ambitious and even then Marius Kloppers [chief executive of BHP] told us that we wouldn’t see the benefits of the deal for as long as 10 years. This is not the sort of thing we want him to spend the money on.”

Another investor said: ”Kloppers is very deal hungry – he’s told us he wants to preserve the cash for expansion, but we just don’t see the point, or the value.”

BHP has reportedly got an eye on Anadarko, one of BP’s partners on the ruptured well in the Gulf of Mexico.

Rio chief Tom Albanese is seen as being just as ambitious to complete a deal, particularly after the collapse of its merger talks with BHP three years ago.

Rio is in talks with Australian miner Riversdale over an agreed $3.9 billion bid. The company has also agreed to increase its holdings in Ivanhoe Mines in Mongolia.

Rio approved major capital projects totalling $5.5 billion in the fourth quarter last year.

The company spent time recovering after it bought Canadian aluminium producer Alcan for $38 billion in 2007.

The damage to Rio’s balance sheet from what was regarded as a reckless acquisition, made when global metal prices were at record highs, had to be repaired by a series of asset sales and a $15.2 billion rights issue.

The company’s net debt load is now $27 billion lighter than it was at the end of 2009.

One of Rio’s key shareholders said: ”There’s a danger with Rio that Riversdale is just the start. We want assurances that there will not be any attempt at big deals.”

Sourced & published by Henry Sapiecha


Wednesday, January 26th, 2011

Brendan Grylls forced

to reveal Palmer dealings

January 26, 2011 – 11:07AM
CCC urged to probe email trail between Clive Palmer and Nationals leader Brendon Grylls.
CCC urged to probe email trail between Clive Palmer and Nationals leader Brendon Grylls.

The West Australian Information Commissioner has ordered Regional Development Minister Brendon Grylls to release information about his dealings with mining magnate Clive Palmer.

For months the WA opposition has pursued the government over why Mr Palmer’s company Mineralogy was not forced to pay a $45 million bond for the project in the Pilbara.

In March last year opposition state development spokesman Mark McGowan applied under Freedom of Information for all documents to and from the minister’s office concerning Mineralogy and its chairman Mr Palmer, a National Party donor.

As a result Mr Grylls, the WA National Party leader, released 11 edited documents but refused to hand over a further 17 because he viewed them as outside the scope of Mr McGowan’s application.

The information commissioner found Mr Grylls’ decision was “deficient” because it did not give “details of the reasons for the refusal”.

“The notice given to the complainant only asserted that the 17 documents, to which access was refused, were exempt,” the finding stated.

“However, the material facts that is, the facts necessary to constitute the exemption claimed and references to the material on which the minister’s findings were based were not included in the notice.”

Following a search of an email account of a former staffer of Mr Grylls, the commissioner also found six additional documents relevant to the FOI application.

Mr Grylls will now be forced to reveal about 35 additional documents either partially or in full.

Although the minister and Mr Palmer can appeal the decision through the courts, Mr McGowan called on them to be open and transparent.

“Mr Grylls must now come clean and release the documents,” Mr McGowan said.

“While Mr Grylls and Professor Palmer can appeal this decision to the Supreme Court, I call on them to finally be open and accountable and release the documents.”

He said the decision to exempt Mineralogy from the paying the environmental bond had saved Mr Palmer $45 million and “brought into question the integrity of the state’s environmental approvals process”.

“Earlier documents released regarding this matter show that Mr Grylls was intimately involved in lobbying the environment minister and the premier’s office to assist Clive Palmer’s project,” he said.


Sourced & published by Henry Sapiecha


Monday, January 17th, 2011

Santos Commits to $16 Billion

Queensland LNG Project

January 13, 2011, 12:49 AM EST

More From Businessweek

Jan. 13 (Bloomberg) — Santos Ltd., Australia’s third- largest oil producer, has committed to building a $16 billion liquefied natural gas project, helping the Queensland state economy recover from “devastating” floods.

Santos and partners Total SA, Petroliam Nasional Bhd. and Korea Gas Corp. will develop a venture at Gladstone that’s expected to produce 7.8 million metric tons of LNG a year and create 5,000 construction jobs, the Adelaide-based company said in a statement today. The site is about 550 kilometers (340 miles) north of the state capital Brisbane, which is experiencing its worst floods since 1974.

“These floods will have a lasting personal, environmental and economic impact on Queensland,” Santos Chief Executive Officer David Knox said on a call with reporters. “This project will be helping Queensland to get back on its feet.”

The venture is one of four on the central Queensland coast planning to liquefy gas extracted from coal deposits for shipment to Asian clients. BG Group Plc, the U.K.’s third- largest gas producer, said on Oct. 31 that it would build the Queensland Curtis LNG development at a cost of $15 billion.

“It’s all down to project execution now,” said Benjamin Wilson, an analyst at JPMorgan Chase & Co. in Sydney. Because of competition for labor, it’s important to approve engineering and construction contracts “as quickly as possible.”

Costs, Jobs

Santos rose after the announcement, advancing 2.2 percent to A$13.45 at the 4:10 p.m. close in Sydney, the most in more than three weeks, compared with a gain of 1.5 percent for the benchmark S&P/ASX 200 Index.

The oil and gas explorer has said it is signing contracts for the development of the project at fixed prices to reduce the risk that labor shortages will drive costs higher. Santos has awarded work to Bechtel Corp., Saipem SpA and Fluor Corp.

BG has said its venture is expected to generate 5,000 construction jobs during the next four years. BG’s project will have two processing units with a combined capacity of 8.5 million tons of LNG a year.

Santos anticipates 1,500 jobs from the project in the first half of this year and that construction will gradually “ramp up” before peaking in 2013, Knox said. The Australian company will own 30 percent of the project, while Kuala Lumpur-based Petroliam Nasional, or Petronas, and Paris-based Total will each own 27.5 percent. Korea Gas will have 15 percent.

Rebuilding After Floods

“Proceeding now with projects like this will be a tremendous boost to the Queensland economy as we recover from the devastating impact of the floods,” state Premier Anna Bligh said in the Santos statement.

The venture aims to begin exports in 2015, generating an average of $6 billion in annual revenue and has combined supply agreements worth more than $120 billion, Santos said last month.

“This project and economic development more generally is important in underpinning the skills, tax revenue, wealth and capacity to respond and rebuild in the aftermath of the current flood crisis in Queensland,” Australian Energy Minister Martin Ferguson said in the statement.

ConocoPhillips and Origin Energy Ltd. plan a rival coal- seam gas-to-LNG venture in Queensland targeting rising Asian demand for cleaner-burning alternatives to coal. Arrow Energy, acquired last year by Royal Dutch Shell Plc and PetroChina Co., proposes a fourth LNG project in the state.

Gorgon LNG

Santos is feeding its project with gas resources from the Bowen and Surat Basins in southeast Queensland and building a 420-kilometre pipeline to Gladstone. The floods aren’t expected to cause any delays to the development schedule, Knox said.

Santos has “plenty of reserves available to us” to support two LNG processing units, or trains, at the Gladstone site, Knox said on the call.

The Santos-led venture will have more than half the capacity of the A$43 billion Gorgon LNG project that Chevron Corp. and partners Exxon Mobil Corp. and Shell are building in Western Australia. The country’s largest resources development is due to begin LNG exports in 2014 from a three-unit, 15 million ton-a-year facility and may add a fourth and perhaps a fifth processing unit.

LNG is natural gas that has been chilled to liquid form, reducing it to one-six-hundredth of its original volume at minus 161 degrees Celsius (minus 259 Fahrenheit), for transportation by ship to destinations not connected by pipeline. On arrival, it’s converted back into gas for distribution to power plants, factories and households.

Sourced & published by Henry Sapiecha


Monday, January 10th, 2011


The Queensland weather has really started to impact on the economic outlook in Australia– latest reports suggest that as much as 0.5% of GDP growth could be sliced off next year’s growth. Terrible as this news is, especially for the locals, there are likely to be trading opportunities – on the currency – a short on the OZ dollar and also some broader impact on commodity prices as exports are impacted. This scenario reinforces the notion that irrespective of what is going on, there is invariably a trading opportunity. Commodities enjoyed a massive run last year – being one of the most profitable areas of the market for trading and this year may well build on that.

Sourced & published by Henry Sapiecha


Monday, January 10th, 2011


As long as there are no other strong material fundamental circumstances prevailing in any single commodity the dollar/commodity correlation overrides all else. This is especially true for precious metals. We remain bullish of gold although the trade is an overcrowded trade we see further upside given the level of geopolitical and economic uncertainty in the immediate future. We are convinced that the driving force behind gold’s strength is not inflation nor the dollar devaluation but the acceptance that gold has become the world’s third most popular ‘currency’ and that it will move past the euro soon and into second place. The euro will become less attractive to traders, investors and asset managers while their need to hold gold will grow.

We see any short-term weakness in gold as a buying opportunity supported by increasing uncertainty related to the euro-zone and rising inflation in Asia, particularly China.


World equity markets need a reason to rally – they may be getting their wish!

The Australian economy will continue to benefit from Asian growth during 2011 while Europe and the US limp along while dealing with their own problems. I expect a two speed global economy in 2011 with Chinese and Indian growth around 10% and Europe and the US at 2%.

A major structural change is under way in the global economy with emerging economies again set to outperform developed countries. The major risk to the global economy is still Europe, I expect more of the feared risks of sovereign debt to realise during 2011, possibly a major national default or a bank collapse.

Chinese Vice Premier Li Kuqiang has been touring in Europe and particularly Spain promising to purchase Spanish debt, a sign of the continuing expansion of Chinese influence around the globe.

Australia’s future will be reliant on our continued relationship with China, or Asia as a whole. We are well placed in the region and as long as we can maintain strong economic and business relationships with China we will continue to grow. China is at-tempting to engineer a soft landing after inflation has spiked above 5% and heading toward 7%. The inflation spike is directly related to their stimulus spending of 2009/2010 and should be seen as a window of what is to come in the US.

Chinese regulators will keep raising interest rates and imposing controls on property investment and speculation, such as the rumoured property tax. Inflation is now China’s number 1 concern but I cannot see Chinese regulators moving so aggressively as to cause a hard landing or a crash. Chinese politicians are about to handover leadership to a new generation and I don’t see the economy being compromised at this key political turning point.
Last year, India, quietly rose to become Australia’s fourth biggest economic market. India is expected to grow at close to 10% in 2011.

The two-speed global economy will create problems for governments and central banks. The US Federal Reserve is expected to keep rates low for ‘an extended period’, at close to zero, and press ahead with their QEII policy of buying assets in the hope of stimulating the economy.

The US government must start to reign in its massive debt eventually but I think those decisions will not need to be made until into 2012. The QEII program will extend at least until June 2011 and will support positive sentiment over the same period. Fed Chairman Ben Bernanke said he was prepared to consider QEIII if it was needed. They have painted themselves into a corner, now that they have come so far with the stimulative measures they cannot turn back. They will press ahead in the hope that at some stage soon the economy will show signs of stronger recovery, and that may be happening now. We sense growing optimism in the US recovery as each new release of data highlights an economy attempting to recover. The ADP numbers released last week changed a lot of minds about the strength of the US economy and set the stage for the Unemployment Report.

We sense growing optimism in the US recovery as each new release of data highlights an economy attempting to re-cover. The ADP numbers released last week changed a lot of minds about the strength of the US economy and set the stage for the Unemployment Report on Friday night. The ADP report showed that business (mainly small business) added 297,000 jobs in December. That number forced published unemployment ‘ guesstimates’ to be revised downwards. The market was expecting a fall in unemployment to 9.7% from 9.8% leading into the report.

We should note that the correlation between the ADP jobs report and the official employment report is not perfect, so ‘as goes the ADP number, so goes the non-farm’, just not perfectly. The ADP number is much more volatile on a month-to-month basis.

As it turned out U.S. payrolls missed the forecast adding credibility to Federal Reserve Chairman Ben Bernanke comment that it could take ‘four or five more years’ for the labour market to completely mend. Payrolls increased 103,000, less than the median projection of 150,000. The jobless rate fell to 9.4% reflecting the shrinking workforce as Americans stop looking for work.

I still hold the very strong view that there can be no complete recovery in the U.S.A. without jobs; that is not to say that the current level of optimism in the U.S. is misplaced but without jobs the recovery picture will always be incomplete, a bit like a jigsaw with a missing piece.

The European Central Bank is not likely to raise rates from the current 1.00% in the near term and is most likely to come under severe pressure to continue to pump liquidity into the system to support Ireland, Spain, Greece and Portugal. The debt crisis in Europe will spread to Portugal, Spain, Italy and Belgium this year and as a result I expect a banking crisis. The key question in Europe is whether Germany will continue to be the main source of monies to pay for the bailouts. While the German economy is growing strongly and selling its manufactured goods to the Chinese they can afford to underwrite the bailouts but there are a lot of headwinds as Germany attempts to force EU members to get their houses in order.

Sourced & published by Henry Sapiecha


Saturday, January 8th, 2011

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Better times bring return of the deal

It took a while, but the market’s appetite for acquisitions has returned with gusto.

THE markets didn’t need the Goldman Sachs deal with Facebook this week, valuing the social network at about $US50 billion, to confirm that last year’s late binge of deal doing would continue well into the new year, but it helped keep the champagne corks popping.

After the drought of 2008 and a quiet start to 2009, normal services have resumed.

”When the GFC hit, most people swapped into a short-term survival mode,” says Allens Arthur Robinson corporate partner Richard Kriedemann. ”The second half of last year saw things return to a more normal, longer-term trend.”

And the party isn’t confined to the latest crop of Silicon Valley dotcoms either. After all, the sliver of money actually being handed over to Facebook by Goldmans and other friends – $US450 million – pales into insignificance beside the $US40 billion that BHP Billiton offered in a failed bid for Canada’s Potash Corp last year.

The setback is not expected to stop the miner from attempting another one or more  multibillion-dollar acquisitions this year.
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Also it’s not like all the deal-making in the resource sector has been confined to BHP, as shown by Newcrest’s $24.5 billion merger with fellow gold producer Lihir.

The resource sector wasn’t the only dealer in the mix, with AMP playing its part in the $13.3 billion mop-up of AXA Asia Pacific – the biggest Australian-based transaction of the year and the third-biggest Asian-based takeover.

It helped mergers and acquisitions activity in Australia more than double last year to $US164.4 billion, according to figures from Thomson Reuters, giving the lucky country a significant chunk of the $US474.6 billion in activity in Asia, excluding Japan.

There are no prizes for guessing the resource sector is expected to continue to lead activity this year.

Rio Tinto’s recent $3.5 billion bid for coal producer Riversdale Mining is a taste of things to come, with Chinese interests also continuing to scour the country for strategic stakes in other commodity suppliers.
Money At Home Today

And after BHP’s recent failed attempts to expand with a Rio tie-up and Potash – the world’s regulators appear to be of the view that BHP is getting a little too big – energy may prove to be the only viable expansion option.

BHP is expected to devote a chunk of its growing pile of cash to an acquisition in the oil and gas sector, with more than 20 independent exploration and production (E&P) companies in the US market on its watch list.

It was against that background last week that London’s Daily Mail tipped BHP was considering making a $US90-a- share, or $US45 billion, bid for Anadarko Petroleum. BHP watchers say Anadarko is not the only potential multibillion-dollar deal in the company’s sights.

BHP may look to take out Noble Energy, a $US15 billion company and operator of the big Leviathan gas discovery off Israel, or Cobalt International Energy, valued at $US4.3 billion.
Marketing with no money

A more tantalising prospect is BHP as a potential suitor for Woodside Petroleum, which went into play last year after Shell sold a 10 per cent stake for $3.3 billion. This implicitly put its remaining 24 per cent stake in play for the right buyer.

The resource sector’s appetite for acquisitions, locally and overseas, is to be expected given the strength of company cash flows, their stock, and the Australian dollar, but it is not expected to stop overseas interest in Australian companies across the board.

Kriedemann says a return of private equity this year will see a surge in deal making in Australia.

”There have already been a number of privately negotiated deals occurring and I don’t think you can point to any one area of the economy and say it will be immune from M&A activity in the next 12 months,” Kriedemann says.

Freehills’ merger specialists, Tony Damian and Neil Pathak, agree.

”The conservatism of the last three years has resulted in many large and mid-market companies with low gearing and stable cash flow . . a nice combination for a private equity pursuer,” they wrote before Christmas.

”The time to strike would seem to be now, particularly, before the general economy improves and asset prices increase.”

Private equiteers TPG and the Carlyle Group certainly don’t need any prompting on this point, they joined forces last year to acquire Healthscope for $2.7 billion.

Another strong theme Damian and Pathak expect to continue this year is strong overseas interest in Australia’s agriculture sector, which saw takeovers last year of AWB by Canada’s Agrium, CSR’s sugar business, Sucrogen, by Singapore’s Wilmar International, and Ricegrowers by Spain’s Ebro Foods.
Eels Deals

But it won’t be plain sailing as the Singapore Stock Exchange is finding with its $8.4 billion bid for Australian Securities Exchange and BHP did with Potash.

Intervention by the Australian Competition and Consumer Commission killed several deals last year, like NAB’s tilt for the AXA assets, although not the ASX bid, which is being lost in the corridors of Canberra.

Freehills also expects the Foreign Investment Review Board to be more vigilant this year, especially in relation

to the resource and agribusiness sectors, which are expected to be the main areas of activity.

The law firms says FIRB vigilance reflects a global trend for increased scrutiny of foreign investments.
Small Loans Australia

”In Australia, this will manifest itself in FIRB probing and seeking additional information and an increased incidence of approvals being granted subject to conditions and undertakings relating to maintenance of Australian head office, industry impacts, pricing of export of product and maintenance of employment. Also expect some outright rejections (which will perhaps be presented as withdrawals of applications),” Freehills says.

Events last year are expected to pave the way for potential M&A candidates this year outside the red-hot resource sector.

A split of Foster’s wine and beer divisions is expected to attract attention, as is Tabcorp’s decision to divide its casino division from its wagering and gaming operations.

Asahi Breweries, Japan’s second-largest brewer and the acquirer of Cadbury’s Australian drinks unit in 2009, reportedly hired advisers to look at Foster’s beer business last year and its president, Naoki Izumiya, said recently it will “aggressively seek acquisitions and alliances” this year., Advertising for everyOne!

The brewer said in April that it may buy food and alcohol companies in the Asia-Pacific region, and has also said it may spend as much as ¥400 billion on acquisitions.

There is more certainty around Tabcorp’s split, although no one is punting on either operation surviving as a stand-alone operation for long, with potential predators already lining up for both divisions.

James Packer’s gambling operation, Crown, has been cited as a likely buyer of Tabcorp’s casinos while Tattersall’s chief executive, Dick McIlwain, has expressed interest in the wagering and gaming business, which would put all Australia’s traditional wagering pools under one roof for the first time.


The most intriguing transaction of the year is likely to be one of the earliest, with the receivers appointed in controversial circumstances to one of the world’s biggest ammonia producers, Burrup Fertilisers, expected to appoint advisers and fast-track the sale of a 65 per cent stake in the company owned by its founder, Indian entrepreneur, Pankaj Oswal, and his wife.

The entire company was valued at more than $3 billion in 2008 when it first attempted to go public before the GFC.

The receivers report that more than 10 parties are interested. The front runner is expected to be Burrup’s other shareholder, Norwegian fertiliser company Yara International, which also has a long-term agreement with Burrup to buy all its ammonia.



Sunday, January 2nd, 2011
Indian Companies Looking for International Acquisitions and Activities
With rapid growth in their domestic market, Indian chemical firms are looking for international acquisitions and other activities that will provide access to cheaper feedstocks and new high-growth markets.Tata Chemicals recently acquired U.S.-based General Chemical Industrial Products for $1.01 billion (Euro 652 million), making it the second largest global Soda ash producer. With the acquisition, the company has established long-term fundamentals based on demand growth prospects, according to vice president R. Mukundan. Tata is also hoping to build a new plant or expand an existing facility in Kenya.

India-based Nirma also purchase a U.S.-based Soda ash producer – Searles Valley Minerals – the only producer of sodium borates, boric acid and sodium sulfate utilizing the more cost-effective method of solution mining.

Reliance Industries has been actively acquiring Polyester producers, including Hualon, now called Recron (Malaysia) and Trevira, located in Germany. The company has also signed a memorandum of agreement with compatriot firm GAIL to develop a gas-based cracker outside of India. The two companies plan to make a proposal to the Qatar government for a $1.3-billion petrochemical plant. Reliance may also invest in a cracker and polyolefins complex in Peru.

Sourced & published by Henry Sapiecha


Saturday, January 1st, 2011

Lead shipments halted

after contamination scare

Lucy Rickard
January 1, 2011 – 12:30PM

The Western Australian State Government has put a halt to lead shipments through the Fremantle ports, after a company allegedly breached the conditions for transporting the product.

Acting Environment Minister Peter Collier told Magellan Metals to immediately cease lead shipments through the port after advice received from the Office of Environmental Protection Authority indicated lead may have leaked from containers.

Mr Collier said the state’s environmental watchdog will be taking over investigations & looking into the matter.

“The OEPA advises there is extensive monitoring of lead contamination along the transport route from the mine to the port, and to date no Magellan lead has been detected through that monitoring program,” he said.

“However, given the environmental conditions concerning lead levels inside the containers may have been breached, it is in the public interest for shipments to cease.” Whilst the matter is investigated.

Owner and operator of Magellan Metals, Ivernia, released a statement early this afternoon detailing the company’s position on the order to halt lead movement & transportation.

“All lead concentrate produced at the Magellan Mine is transported in double-lined bags inside sealed steel containers,” the statement read.

“Extensive monitoring, sampling and analysis from close to 300 individual soil, air, and water samples sites has not shown the presence of any lead from the Magellan Mine along the road and rail route after more than a year of transport operations.

“Ivernia, along with its wholly-owned subsidiary Magellan Metals Pty Ltd, is working with government agencies to investigate the possible source of lead detected by air monitoring equipment within containers.

“The Company is focused on addressing issues that may be identified in relation to its loading operations and recommencing transport operations as soon as the issue is resolved to the satisfaction of the Government of Western Australia.”

The statement said that the order was issued to halt all lead transport after monitoring equipment installed by an independent inspector “identified the presence of airborne lead from Magellan within a small number of containers”.

“All airborne lead levels in the sealed containers were consistently below accepted occupational health levels established by the Australian National Occupational Safety and Health Commission,” the statement read.

Mr Collier said the government will wait for the formal advice of the authority before determining the long-term future of lead shipments via Fremantle.

The company was given the green light to transport lead through the area in August 2009 after it was banned from operating out of Esperance, where contamination from lead dust led to the death of thousands of birds in 2006 and 2007.

The decision to approve Magellan’s use of the port city for exporting lead sparked community outrage in the Greens-held seat of Fremantle, despite an increased monitoring of product transport.

The approval for Magellan Metals involved stringent guidelines for transporting the lead to the port included the use of double laminated and sieve-proof bags for all lead concentrate products.

Sourced & published  by Henry Sapiecha


Saturday, January 1st, 2011

BHP Billiton and Rio Tinto

Terminate the Iron Ore

Production Joint Venture

18 October 2010

Rio Tintos Sam  Walsh

Back in 2009, BHP Billiton and Rio Tinto signed core principles to establish a production JV covering the entirety of both companies’ Western Australian Iron Ore assets.  This resulted in the signing of definitive agreements on 5 December 2009.  The completion of these agreements was subject to a number of conditions, including regulatory approvals.

Since the agreement was signed it has become increasingly apparent that regulatory approvals of the joint venture are unlikely to be achieved.  Consequently, BHP Billiton and Rio Tinto have reluctantly agreed to dissolve the proposed joint venture.

BHP Billiton Chief Executive Officer, Marius Kloppers, said, “The large synergies from combining our Western Australian iron ore assets with Rio Tinto’s have caused us to persevere in seeking to obtain regulatory approvals.  However, it has become clear that this transaction is most unlikely to obtain the necessary approvals to allow the deal to close and as a result both parties have reluctantly agreed to terminate the agreement”.

Mr Kloppers said he appreciated the high level of cooperation and goodwill displayed by Rio Tinto in pursuing the joint venture.  The parties have mutually agreed that no break fee is payable by either party.

While BHP Billiton was progressing approvals for the joint venture, it has continued to invest in its Western Australian Iron Ore business.  With the termination of the joint venture, this focus on efficiently growing and operating our Western Australian Iron Ore business through our existing Perth-based Iron Ore management team will continue forward.

Sourced & published by Henry Sapiecha