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THE Western Australian provincial government is demanding more royalties from Rio Tinto and BHP Billiton otherwise it will not rubber-stamp their planned iron ore merger valued at a staggering $116-billion (R865billion).
Western Australia premier Colin Barnett told the chief executives of both companies in a meeting this week he wanted to double their royalties to put them on par with other mining companies in the state.
Under agreements dating back to the 1960s, both companies pay the state a royalty of 3,75percent, half the amount that other companies pay.
Barnett told reporters after the meeting: "The major point I stressed is I want to see full royalties applied to both BHP and Rio projects".
The Australian newspaper further quoted Barnett as saying both executives "drew breath" when he made the remark but made no concession.
Rio Tinto and BHP Billiton, the world's second and third largest iron ore miners respectively, announced in June a plan to merge their Australian iron ore operations.
The operations are based in the west with the joint venture valued, at the time, at $116billion.
The planned tie-up has drawn sharp criticism from steel companies that rely on ore from both companies. They fear it will create an Australian oligopoly capable of unfairly influencing pricing and supply.
The proposed merger requires a series of government approvals, including satisfying new legislation in the state of Western Australia.
Barnett was quoted as saying that, in recognition of their contribution to the early development of the state's iron ore industry based in the Pilbara region, both companies had previously paid a lower royalty fee.
However this was simply not justifiable anymore given today's global economic climate and the size and wellbeing of the companies, he said.
"I don't believe that anyone can argue today that BHP and Rio - the world's largest mining companies (and) the world's wealthiest mining companies - should pay half the royalty rate (anymore)." - Reuters