Commodity Online
NEW DELHI: Will world’s largest miner BHP Billiton Ltd’s attempt to take over the third biggest mining firm Rio Tinto Ltd influence the global iron prices? That is the billion dollar question haunting regulators in Europe and Australia now.

BHP Billiton Ltd recently announced that it is attempting to take over the industry’s third-ranked company but it faced significant hurdles in its bid as Australian and European regulators continue to question the deal proposed in November.

However, the move is bound to cause ripples in iron prices across the globe, which will affect Indian and China in a big way because these two fast developing countries need a lot of iron in the coming days.

The greatest concern for regulators is how a combined BHP-Rio would affect the price of iron ore, a key ingredient in the production of steel. BHP and Rio Tinto separately pushed through iron-ore price increases of 85% this year.

Meanwhile, BHP, based in Melbourne, Australia, also reported a 15% increase in net profit for the fiscal year ended June 30 to $15.39 billion from $13.42 billion. Revenue rose 25% to $59.47 billion.

Chief Executive Marius Kloppers said given the overall rise in mining costs, including shipping, labour, equipment and exploration, it is more important than ever for BHP and Rio Tinto to unite.

Rio Tinto has rejected BHP’s all-stock offer currently valued at $133 billion as too low. But Rio has acknowledged that the two companies, which are in many of the same businesses, have significant potential as a combined entity.

Last week, Australian regulators delayed their decision to sign off on the proposed deal and asked BHP for more information. Kloppers declined to say what information the regulators wanted. Regulators in Europe, which present the bigger hurdle, are expected to decide whether to approve the deal by the end of the year. US regulators have granted preliminary approval.

That — along with a tripling in the price of coal, similar increases for manganese and other steelmaking minerals and continued demand from emerging economies such as China, India, Russia and Brazil — signal commodity prices will remain firm, Kloppers said.

He noted that profit increased more than 50% to $9.4 billion in the six months ended June 30 from $6 billion in the six months ended December 31.

“We view that as good momentum,” Kloppers said. Even so, the fall of some metals prices has made Wall Street investors skittish on worries about an end to the commodities boom.

BHP’s Australian-listed stock has dropped 13% since the beginning of July and is down 22% from its May 19 high.