Iron ore and steel factory

BHP share price reflects JV benefits

| Mon, 08 Jun 2009 10:27 [miningmx.com] -- BHP Billiton's increased share price as a result of the joint venture announcement with Rio Tinto is not overvalued, senior portfolio manager at Sanlam Investment Management Barend Ritter said.

"I actually think it's in line with the potential benefits of the transaction," Ritter said on SAfm Market Update.

Rio Tinto announced on Friday that it abandoned a $20bn deal with Chinalco. It is going to raise another $15bn through a rights issue, and Rio has agreed to a $116bn joint venture with BHP Billiton.

"The iron-ore joint venture has been coming a long time. I think the first time BHP approached them was about ten years ago, and we know they tried to take over Rio Tinto on a hostile basis a year-and-a half, two years ago, to specifically target that asset," Ritter said.

"But I think the sort of global meltdown we've seen in the world has created an opportunity for them, and also combined with Rio Tinto's ambitions in the aluminium industry, where they took over those assets and sort of geared themselves to the hilt, and found themselves in a position where they couldn't fund themselves," he said.

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