BHP-Rio royalties agreement still stands

The state government expects its royalties agreement with Rio Tinto and BHP Billiton to stand even if a proposed joint venture between the two companies doesn't go ahead.

Rio Tinto says it has not made any final decision about possible outcomes or next steps regarding the proposed Pilbara iron ore joint venture with BHP Billiton.

Rio said its board held a meeting on Monday at which a range of issues related to the joint venture were discussed, the London-based company said in a statement.

"The Board acknowledged recent communications from regulators that indicate potential obstacles to achieving clearance for the joint venture," the company said.

"This includes the recent receipt of interim reports from the Japan Fair Trade Commission and the Korea Fair Trade Commission, and ongoing discussions with the European Commission and the Australian Competition and Consumer Commission."

Rio released the statement early this morning after reports the JV is on the brink of collapse.

BHP has refused to comment on the reports.

In June, the state government signed a $340 million royalties agreement with the two companies.

The two mining companies agreed to pay iron ore royalties at all their Pilbara mines at a rate of 5.625 per cent for fines and 7.5 per cent for lump from July 1.

Acting Premier Kim Hames has told the ABC the money will be paid, regardless of the outcome of the merger.

"My understanding, as I said is, that those changes will still be required, merger or not and so the state government will still get the funds that have been committed," Mr Hames aid.

The venture has been subject to delays while the Australian Competition and Consumer Commission decides whether to allow the tie up of the companies.

On the September 15, the Australian Competition and Consumer Commission again delayed making a decision, at the request of BHP and Rio who said they needed to have further discussions with overseas regulators and provided additional submissions.

Steel makers in Europe and Asia, who require vast quantities of iron ore, have expressed anger at the possible joint venture, saying it would give the miners too much market power.

The ACCC began its investigations into the planned joint venture on December 7, 2009 and in March this year outlined its preliminary concerns at the tie-up.

The timeframe to review the project has been suspended since July 7.

Even if the ACCC gave the joint venture the green light, BHP and Rio would likely have to get the all clear from regulators in Asia, Europe and elsewhere before it could proceed.

Since the proposed project was first announced some commentators have been growing more sceptical it will proceed as planned.