Johannesburg — GLOBAL resources giants BHP Billiton and Rio Tinto met Saturday's deadline to sign binding agreements on a 116bn mining joint venture in w estern Australia, despite speculation they might walk away because of resistance from various quarters.

The agreement, originally announced in June, is expected to meet stiff opposition from competition authorities in Europe and Australia and from Chinese steel makers, which are the biggest buyers from this source.

But the deal, with an estimated 10bn in cost savings for the parties and a substantial cash payment for debt-burdened Rio Tinto, is considered strategic for both parties, especially after recent volatility in iron-ore demand and pricing.

BHP Billiton's CE for ferrous and coal, Marcus Randolph, said in the group's latest annual review that the joint venture would unlock benefits of scale in the Pilbara iron-ore resource and infrastructure, creating the world's leading iron-ore operations.

"The major stumbling block really will be the regulatory approvals. That's still going to be up in the air," said Tim Schroeders, portfolio manager at Pengana Capital.

"We will ensure that there is full compliance with the European Union's antitrust rules," European Commission spokesman Jonathan Todd said.

The groups said in a joint news release they had filed submissions with the European Union and Australian Competition and Consumer Commission and expected to complete the deal in the second half of next year.

Each company would hold 50% of the joint venture but they would separately market their share of the production. In October they scrapped a plan to jointly market 15% of the iron ore from the venture, in response to pressure from steel makers.

The agreement follows last year's hostile bid by BHP Billiton for Rio Tinto, which met opposition not only from Rio Tinto, which felt it undervalued the group's assets, but from competition authorities.

It would have resulted in a combined entity controlling 35% of global seaborne iron-ore production and 40% of coking coal.

BHP Billiton walked away from the proposed merger in November last year, citing the deterioration in credit markets. Since then, iron-ore prices have collapsed, making it impossible for producers to reach agreement with major Chinese steel makers on an annual contract price increase.

Chinese buyers refused to accept the 35%-45% cut in iron-ore prices negotiated with Japanese and Korean steel buyers, although they were reported to be buying at these prices on the spot market.

Chris Griffith, CEO of Kumba Iron Ore, the world's fourth-biggest producer, recently predicted that iron-ore prices would rise about 10% next year and that there would be global shortages from 2012 onwards. With Reuters, Bloomberg