BHP and Rio agree royalty hike in West Australia

21st Jun 2010 08:07

BHP Billiton and Rio Tinto have agreed to increase iron ore royalties at all their mines in Western Australia in order to smooth the passage of their US$116bn iron ore joint venture.The deal will see rates rise from 3.75% to 5.625% for fine ore and from 3.25% to 5% for beneficiated, or lower grade, ore. The rate of 7.5% for lump ore is already the prevailing rate for most of that ore produced by BHP's projects.It's thought the agreement could bring in an extra $300m a year for the West Australian government, which is being asked to approve the merger of Rio and BHP's iron ore merger.BHP said the state government had also agreed to permit sharing of infrastructure and blending of products across the networks operated by the pair, and to modernise other provisions of the State Agreements."These changes to the State Agreements will enable BHP Billiton's existing iron ore operations to operate more efficiently. They will also help facilitate the proposed West Australian Iron Ore Production Joint Venture between BHP Billiton and Rio Tinto, which is still subject to approval from regulators and shareholders," read a statement from the miner Monday. A one-off payment of $350m will also be made to the State government "in recognition of the value that these State Agreement amendments will generate and the need to support our local Western Australian communities".