BHP Billiton and Rio Tinto are negotiating how to abandon their proposed $116 billion iron-ore joint venture without triggering a $250 million break clause, The Sunday Times reported.

The London newspaper said the mining companies were set to abandon the merger after European regulators indicated they would block the deal.

Spokesmen for BHP and Rio both declined to comment.

EU competition commissioner Joaquin Almunia told Reuters on Saturday a statement of objections to the deal would be sent to the two firms in the coming days.

His comments came a day after EU antitrust regulators raised concerns about the proposed venture.

Unless Rio and BHP -- the world's second and third biggest iron ore producers, respectively -- offer concessions, their plans to merge their Australian iron ore operations and save $10 billion in costs would collapse.