The blockbuster $120 billion merger deal between BHP Billiton Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO) to fuse their Pilbara iron ore operations in Western Australia could be fizzling out even before its actual realisation as Fairfax dailies carried stories of a crumbling agreement between the two giant resource firms.

Fairfax papers said on Wednesday that the BHP-Rio deal is effectively dead citing remarks allegedly emanating from a Rio Tinto board meeting on Monday though an official statement from the company simply confirmed that the matter was indeed taken up.

The same statement also stressed that the Rio Tinto board has yet to finalise any decisions or what next step to take on the proposed agreement though the company admitted that questions raised by competition regulators may pose "possible obstacles to achieving clearance for the joint venture."

Rio Tinto specified that government regulators for Japan, Korea, the European Commission and the Australian Competition and Consumer Commission all floated concerns that the planned partnership between BHP and Rio Tinto could lead to a monopoly of iron ore prices in the world market.

A BHP Billiton spokeswoman opted not to make comments on the story but she pointed to the fact that the European Commission is still evaluating the merger talks between the world's two biggest mining firms.

The possibility of marrying their Pilbara iron ore operations cropped up amidst Rio Tinto's debt-resulting purchase of aluminium firm Alcan and its falling out with China when the company abandoned its dealings with Chinalco.

Facing huge debts and reeling from a failed takeover bid from BHP Billiton itself, Rio Tinto entered into a discussion with BHP on a possible merger of their operations during the height of the global financial crisis in 2009, both hoping to save some $10 billion operational costs should the deal pushes through.

Yet with the onset of the mining boom and in better shape now in terms of debt level, Rio Tinto heeded calls from its shareholders and eventually declared that it would be revisiting the full merits of the proposed merger in Pilbara.

The new round of speculations sparked interests on both companies market shares and as of 1017 AEDT today, BHP Billiton shares gained 1.9 percent to trade up at $40.25 while Rio Tinto shares soared by 2.2 percent to $78.74.