RIO and BHP Deal Not Accepted by Regulators

International mining conglomerates, BHP Billiton (ASX:BHP) and Rio Tinto (ASX:RIO), the world's No. 1 and No. 3 mining companies abandoned a plan on Monday, to create the largest iron-ore exporter after regulators from Europe to Asia were concerned it would limit competition. The changes demanded by regulators, including asset sales, were unacceptable to both companies, Rio Tinto said. The plans were 16 months in development and included a plan to ave combined iron ore mines and rail and port facilities in the Pilbara region of Western Australia into a production joint venture. It promised at least $10bn in cost savings when it was first proposed in June 2009.

World steelmakers, particularly in China, the biggest iron ore buyer, were from the outset vocal in their opposition. In the end regulators from around the world refused to accept the deal and raised many of the same concerns that they had with BHP's earlier hostile bid for Rio Tinto.

A small consolation prize has already been secured after BHP and RIO reached an agreement in June to pay higher mining royalties to the government of Western Australia in return for being able to blend iron ore product and share infrastructure. Analysts estimate that the changed arrangements, particularly the ability to blend different types of iron ore, could save the companies more than $5 billion, or at least half the $10 billion promised by the failed plan to combine their operations.