Merrill Lynch said that BHP Billiton Ltd and Rio Tinto Group mining companies, may abort their proposed iron ore joint venture by the end of the year because of regulatory objections.

Analysts led by Mr Peter O’Connor in a report said that “Given the obstacles to the joint venture clearance it would appear that the likelihood of joint venture discussions in good faith continuing past the drop dead date of December 31 is increasingly.

Mr O’Connor said that “The deal has faced headwinds for some time and the probability of completing was very low anyway. Given improved financials, compared to when the deal was hatched in mid-2009, we see a solo Rio iron ore unit as an exceptionally viable alternative.”

Rio’s board acknowledged recent communications from regulators that indicate potential obstacles to achieving clearance.

The Japan Fair Trade Commission and the Korea Fair Trade Commission have filed interim reports on the venture and Rio said it’s continuing talks with Australian and European regulators. The European Commission’s preliminary investigation into the plan is coming to an end.

Rio and BHP agreed in June 2009 to combine mines, railroads and ports in Australia’s Pilbara region. BHP pledged to make a USD 5.8 billion equalization payment to London based Rio as part of the accord that would cut costs for the companies by USD 10 billion. The venture initially due to be completed by mid 2010, has been delayed as regulators study the plan.

(Sourced from Bloomberg)