Australian media reported that Australia’s foreign investment regulations will limit BHP Billiton’s takeover options in pursuing Rio Tinto even though BHP is based in the country.

The reports cited Mr Peter Costello the Australian treasurer as saying that “One of the requirements of our foreign investment policy would be that BHP is to have its headquarters in Australia. That is a condition I put in place.”

Mr Costello also said that the merger would have to clear competition hurdles and he declined to clarify whether the proposal raised concerns. He added “That would have to be assessed.”

Mr Marius Kloppers CEO of BHPB had recently said that his company would retain its headquarters in Melbourne in the event it merged with Rio and that any suggestion of BHP moving its head office would cause uproar in the country which is due to hold national elections in a little over a week.