Rio Tinto Group

Rio Tinto wants state firms in mine projects

PUBLISHED : Friday, 04 April, 2008, 12:00am
UPDATED : Friday, 04 April, 2008, 12:00am


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Rio Tinto Group, the world's third-largest mining company, said it would like to work with state-owned firms such as Aluminum Corp of China (Chinalco), its biggest shareholder, to develop mining projects around the world.

Chief executive Tom Albanese, in an interview with the South China Morning Post, yesterday said there were plenty of opportunities for Rio Tinto to co-operate with state-owned enterprises on overseas investments to create new sources of minerals and energy for the world's fastest-growing key economy.

'Rio Tinto has been very successful in discovering some of the biggest new ore bodies in the world,' Mr Albanese said, while on a visit to Hong Kong. 'Many are in very remote locations that require a lot of infrastructure. We see opportunities for co-operative relationships with senior Chinese SOEs on large-scale development [of such mineral deposits].'

Rio Tinto is looking for state firms that can bring in capital or had access to infrastructure. Joint-venture partners could include Chinalco, which this year spent US$14 billion buying a 9 per cent stake in Rio Tinto with Alcoa of the United States.

Co-operation between Rio Tinto and state firms could help to bring world-class mineral resources to the market quicker, Mr Albanese said.

China, the world's fourth-largest economy, has recorded double-digit growth in the past five years, spurring huge demand for minerals and energy. The country is one of the world's largest consumers of commodities.

The mainland uses 24 per cent of world copper and consumes 33 per cent of the world's aluminium. China also accounts for an astonishing 90 per cent or more of global demand growth for iron ore, the main ingredient for making steel, and there are no signs of a slowdown in demand in the short run.

Looking ahead, the mainland would provide opportunities for Rio Tinto to expand its business in supplying aluminium, bauxite, copper concentrate, industry minerals and coal, in addition to iron ore, Mr Albanese said.

Iron ore sold to the mainland last year accounted for about 50 per cent of the world's second-largest iron ore supplier's global volume, and Mr Albanese said it was likely that this would increase with the growth of the mainland steel market.

Imports of iron ore to the mainland, the world's largest steel producer and consumer, last year climbed 17.4 per cent to 383 million tonnes, according to the China Iron and Steel Association.

Rio Tinto, which is asking Asian steelmakers including mainland mills to pay a premium on its ore from Australia on the basis that it costs them less to ship than from Brazil, expects the mainland will more than double its imports of iron ore to almost 900 million tonnes by 2015.

Mr Albanese said the price negotiations between Rio Tinto and mills were continuing and he was 'quite comfortable' with the process despite the fact talks had gone past the April deadline.

He refused to say how much of a premium over Brazilian ore his company was asking but said the system of setting benchmark prices through annual talks had room for evolution to reflect the higher spot prices.

Asian mills agreed with Brazilian mining giant Vale, the world's largest iron ore supplier, for 65 to 71 per cent increases in contract prices earlier this year.

Lightening the lode

State-owned firms are attractive for the capital they can bring to projects

The amount paid by Chinalco to buy into Rio Tinto with US-based Alcoa, in US$14b