JPMorgan Chase & Co said that Rio Tinto Group could seek as much as USD 4 billion more from BHP Billiton Ltd than it already agreed to as compensation for iron-ore assets Rio will contribute to their planned joint venture.

Melbourne based analysts with JPMorgan in a report said that based on higher iron ore price estimates, Rio could ask for between USD 7.5 billion to USD 9.8 billion or as much as 69% more than the agreed so called equalization payment of USD 5.8 billion.

The analysts said that “Higher prices suggest the current payment is “too low and it would be in Rio’s shareholders’ interests for Rio management to re-negotiate the payment upward.”

JPMorgan said that “Things have changed for the better in respect of this deal for Rio Tinto. When it was agreed to, iron ore prices were weak. We believe now Rio has the rightful and strong position to seek more cash for equalizing the respective iron ore interests.”

Rio and BHP, the world’s second and third largest iron ore exporters, plan to combine mines, rail, ports and workforces in Western Australia’s Pilbara region into a 50:50 JV to save at least $10 billion. Spot iron ore prices have more than doubled since the venture, which still faces scrutiny from regulators in Europe, Japan and Australia, was agreed in June.

(Sourced from Bloomberg)