Rio Tinto and BHP step away from joint marketing plan

Rio Tinto’s massive joint venture with fellow mining giant BHP Billiton is not a totally concrete marriage, with both companies taking on the responsibility for their own marketing to placate competition fears. Rio – which owns 80% of the Tiwai Point aluminium smelter, making it the single biggest user of New Zealand’s electricity generation – announced this morning that a planned joint venture marketing would not proceed. In June, the two Australian-based companies signed a non-binding agreement to establish a production joint venture covering the entirety of both companies' Western Australian iron ore assets. Under that agreement, up to 15% of the production was to be sold by the joint venture, independent of Rio Tinto and BHP Billiton. But that plan has now been scrapped and all production from the proposed joint venture would be marketed separately by Rio and BHP. The joint venture plan has been greeted with suspicion by many of the companies’ customers, who were concerned about further concentration of the industry. Those iron ore customers, such as Chinese steel mills, were apparently confused by the venture's structure and the plan to market some of the ore together, but Rio said today that the change will “clarify the nature of the joint venture for customers and emphasise its focus on realising significant production and development synergies”. Analysts have also pointed to the possibility of problems with anti-trust regulators standing in the way of the joint venture when it seeks approval for the production component, and the dropping of joint marketing may help smooth those wheels. Both companies said they were pleased with progress towards definitive joint venture agreements and expected to finalise them on schedule. Rio has also reshuffled its senior management team, with the announcement today it will re-instate the diamonds and minerals product group alongside the iron ore, copper, aluminium and energy product groups. These changes will see a larger executive committee with three new appointments: Doug Ritchie, who becomes chief executive of Brisbane-based Rio Tinto Energy, Andrew Harding, who becomes chief executive of Rio Tinto Copper in London and Harry Kenyon-Slaney, who becomes chief executive of Rio Tinto Diamonds and Minerals, also based in London.