State opposition opposes BHP merger

Western Australia's state opposition is threatening to penalise BHP Billiton and Rio Tinto if they merge, saying that a Liberal government would wipe out vital royalty concessions now enjoyed by the mining giants, The Australian reported today.

Liberal Party leader Colin Barnett, whose odds of becoming premier next week have shortened but is still considered the outsider in the race, said the merged companies, would be forced to pay higher mining royalties and make other concessions if he won, the newspaper said.

Mr Barnett said that BHP's takeover of its iron ore rival wasn't in the state's interest because such a company would become too dominant.

"If they want to do that (merge), then other things would come into play," he said.

"For example, why would they continue to receive a concessional royalty rate? It would be time to get rid of that.

"The current rates fall well below the normal rates for mining royalties.

"It would be one of the issues we would have to discuss."

The state election will be held on September 6.