Australian mining giants BHP Billiton and Rio Tinto on June 21 announced that they have signed a non-binding agreement with the government of Western Australia to amend iron ore royalty rates payable to the state, effective as of July 1, 2010.
According to statements from Rio Tinto and BHP Billiton, the companies have agreed to pay iron ore royalties at all their mines at a rate of 5.625 per cent for fine ore and 7.5 per cent for lump ore. These royalty rates, which will apply from July 1, 2010, are in line with the rates currently specified in Mining Regulations 1981. The new rate brings BHP and Rio into line with the rates paid by other miners in the state, taking away the confessional rate, in return of a go-ahead to the planned $US116 billion joint venture of their Western Australian iron ore operations, which remains subject to regulatory approvals.
The parties have also agreed to a set of state agreement amendments that will promote greater efficiency and flexibility for the current operations of Rio Tinto and BHP Billiton, such as the ability to share infrastructure and blend ore across their networks. These amendments are not dependent on the companies' proposed production joint venture proceeding but they will help to facilitate it, the companies said.
To support local Western Australian communities, it has also been agreed that the two companies will make a one-off, combined payment of AU$350 million to the state government.