JOHANNESBURG (Commodity Online): BHP Billiton Ltd and Rio Tinto Ltd have signed a pact for their proposed $116 billion iron ore joint venture in Western Australia.

The agreements covered all aspects of the proposed venture which will account for all current and future Western Australian iron ore assets and liabilities.

The companies already had an in-principle agreement, and six months ago indicated that December 5 would be the deadline by which to secure a binding deal.

In a statement, BHP Billiton chief executive Marius Kloppers said: “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.”

“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,” Rio Tinto’s chief executive Tom Albanese said.

The deal has been controversial, with Asian steel mills, major buyers of the iron ore, saying it could give the mining giants too much market power.

Rio Tinto is the world’s second biggest iron ore producer and BHP Billiton is number 3.

The miners will have an equal partnership in the joint venture which has been a decade in the making and is expected to deliver production and development synergies of at least $10 billion on a net present value basis.

Synergies will flow from combining adjacent mines into single operations, cutting costs, consolidating expansion projects and merging overhead and management activities into a single entity, the companies said.

But the joint venture deal is subject to regulatory approvals and both companies have filed submissions with the European Commission and Australian Competition and Consumer Commission.

If approved, both companies anticipate the joint venture will be completed in the second half of calendar 2010.

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