Premier Colin Barnett is seeking legal advice in a bid to ensure that WA does not miss out on $1 billion stamp duty and $300 million a year in mining royalties from any merger of BHP Billiton and Rio Tinto's iron ore operations in the Pilbara.

He said any merger would require the approval of the WA Government and he was yet to be convinced of its benefits.

The companies are expected to make $12.47 billion in savings by merging their operations.

Mr Barnett, an outspoken critic of BHP's hostile takeover bid of Rio last year, said he would "take some convincing" that the miners' proposed Pilbara production merger "is in the best interests of Western Australia".

He said the combined entity would have too much control over the State's iron ore industry.

Meanwhile WA's leading unions have warned thousands of job cuts are inevitable if the merger goes ahead.

More than 20,000 people are employed in BHP and Rio's Pilbara operations.

Mr Barnett said yesterday he was adamant the deal would need WA Government approval because it would entail physical changes to the companies operations and therefore require alterations to their State Agreements.

He claimed the transaction seemed structured to avoid paying up to $1 billion in stamp duty and higher royalty rates that he has been calling on the miners to pay for years.

"I don't think it's a reasonable way of behaving," he said.

Yesterday Rio Tinto confirmed negotiations had collapsed with Chinese company Chinalco and it was set to enter into a joint venture arrangement with the world's biggest miner BHP.

Mr Barnett said the companies operated under 20 different State agreement acts which were legislated in the State Parliament.

He said there was a long way to go for the companies.

"To achieve that, if they are to achieve it, there will need to be a number of approvals given," Mr Barnett said.

"Internationally they would need the approval of the European Union and possibly the US Justice Department," he said.

"At a national level there would be a foreign investment review board approval required and perhaps an Australian competition and Consumer Council approval.

"At a State level there's also a requirement...because the State is the owner of the iron-ore a fundamental issue."

PERTH STAFF REPORTERS and AAP