The Pilbara looks like the surface of the moon. It is red and full of iron ore, and a massive JV of sorts was supposed to take place between the two mining titans of Australia, BHP Billiton and Rio Tinto. In a way Rio Tinto were saved by the bell, even though they had to come back to shareholders with a deep begging bowl, and raise a whole lot of money at a deep discount, the regulatory authorities shoed Chinalco away with a long stick. You can't own this Aussie asset, even if you are a big customer you Chinese folk. The irony of that is that the current finance minister down under is an Australian with a minority background, her name is Penny Wong, her father was of Cantonese extract, her mother Australian. Penny is a new Australian I guess.
But it seems that the iron ore JV between BHP Billiton and Rio Tinto is on the rocks. Check this out, via my old friend Garth, I mean Gareth: Rio kills off BHP deal. We wrote about this back in July, on the 20th to be exact, here is a piece of the message back then:
Now dust off the memory banks, because no doubt you remember the Rio Tinto and BHP Billiton JV proposal between their Iron Ore assets? Yes? No? Well, the Sydney Morning Herald is running the story BHP-Rio tie-up said to be 'dead'. Turns out that the regulatory hoops were always going to be the toughest obstacles to overcome. Remember that if there is no conclusion by the last day of this year, well then, the deal expires and the only folks who would have made any money, would have been the folks that drafted all of the documents. I hope that the docs were in electronic format.
But did you see that part with the quote from Tom "hands" Albanese. I call him hands because if he sat on them, that would be like hitting the mute button: "China already consumes twice as much steel as the US, Europe and Japan combined," Mr Albanese said. "By 2025, China will have built 10 cities the size of New York [and] may have 219 cities with more than 1 million inhabitants - compared with 35 in Europe today. What? 10 cities the size of New York? I hope that the infrastructure is better, it probably will be.
Same applies now, regulatory loopholes too high to shoot for, and the Rio Tinto shareholders are becoming increasingly vocal to not supporting this deal. Because as I remember at the time, BHP Billiton might have been the better option for shareholders, and even if the landscape of the moon, I mean the Pilbara is unchanged, the iron ore market is a whole lot better. A JV lost is my sense, BHP Billiton seem to be working a lot harder at wrapping up the regulatory minefield in Canada before they offer a higher price at 150 Dollars a share is my sense.
As my colleague Byron (don't call him Baron) would say, last night I was so excited that I couldn't sleep. And normally he would be referring to a company's earnings or a major data release. Well,
we are on the eve of earnings season once again, this time the third quarter and the kickoff of the majors is tomorrow. Alcoa starts as the first Dow constituent to report numbers, the expectations are again pretty low. An expected 6 US cents versus 4 cents a year ago. Hey, that is a fifty percent increase, but hardly exciting for the aluminium giant. Cans, planes, trains and car sales have not been what they were in the abnormal, I mean old normal.