BHP Billiton in U.S. anti-corruption probe

SYDNEY (Reuters) - Global miner BHP Billiton has discovered potential violations of anti-graft laws relating to its exploration activities, in another blow to the mining industry's tarnished image.

The case, under investigation by the U.S. markets watchdog, follows the jailing in China last month of staff from rival Rio Tinto and comes as both mining giants seek regulatory approval for a $116 billion Australian joint venture.

"This is probably the last thing they need at this point in time," said Tim Schroeders, fund manager with Pengana Capital, referring to BHP's need to keep international regulators onside as it looks to combine its main iron ore operations in west Australia with those of Rio Tinto.

BHP Billiton said on Wednesday it had found the possible violations, relating to old exploration projects, and was now cooperating with the U.S. Securities and Exchange Commission (SEC) and carrying out its own internal probe.

It said the exploration projects in question had been terminated before December 2008, were "relatively small" and were not related to any activities in China, but it declined to detail the possible violations. The SEC declined comment.

"The company has disclosed to relevant authorities evidence that it has uncovered regarding possible violations of applicable anti-corruption laws involving interactions with government officials," it said in a few lines dropped into its quarterly production and exploration report.

"It is not possible at this time to predict the scope or duration of the investigation or its likely outcome," BHP said.

By 0150 GMT, BHP shares were flat in a slightly firmer market, but mining analysts said regulators worldwide would be watching the case closely as they weigh up the planned Australia iron ore venture.

Steelmakers in Asia and Europe are pressing regulators to block the venture, arguing it would give the pair undue influence on the price of iron ore, which has more than doubled on the spot market over the past 12 months amid a commodities boom fueled by Chinese demand.

BHP Billiton and Rio Tinto are the third- and second-largest producers of iron ore, respectively.

EXPLORATION PERMITS NOT IN U.S. - SOURCE

A source familiar with the matter said the projects in question were outside the United States, but would not say where they were located.

The U.S. Justice Department was not immediately available for comment on whether it, too, was looking at the case.

"We can confirm that the SEC's requests for information primarily relate to certain terminated minerals exploration projects and not any activity in China, BHP Billiton's marketing activities or the sale of any of the company's products," BHP said in a separate, emailed statement on Wednesday.

(Additional reporting by Karey Wutkowski in WASHINGTON and Cecile Lefort and Bruce Hextall in SYDNEY; Writing by Mark Bendeich; Editing by Anshuman Daga)

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