Rio all about value: Albanese

RIO Tinto chief executive Tom Albanese said today he was a believer in the need for consolidation and scale in the mining sector but that Rio was “all about value”.
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Rio Tinto chief executive Tom Albanese

Greg Tubby

Value was behind Chinese aluminium group Chinalco’s decision to take a stake in Rio and supported the world’s second-biggest miner’s rejection of a $US147.4 billion takeover offer from BHP Billiton, Albanese told reporters on the sidelines of the PDAC convention in Toronto.

“Chinalco has said they like Rio Tinto, they like our value. I think it reinforced our value argument,” Albanese said.

“I see this as a strategic investment they have made and that reinforces the value message that we have been saying from the beginning.

“They again have told us they like the company, like the business, and they don’t seek to influence management, they don’t seek to put a person on the board.”

But Albanese also sees the need for consolidation in the industry, saying larger scale was “clearly … the story of our times”

“It is part of the shift in economic power from the developed world to the developing world. And while new players crowd in, we see mounting challenges.”

“As an optimist”, Albanese was sure the challenges would be overcome but that it would be “fascinating to see how it plays out”

“What’s certain is that the consolidation we are seeing heralds a new era that we have not seen before and probably won’t see again. We’re on the edge of something huge.”

The takeover bid from BHP, along with the acquisition of Alcan, had spurred Rio to undergo great change, to push the urgency of operational improvement, pick up the pace of Rio’s business and deliver higher value growth, he said.

“Back in November I said that BHP Billiton needs us more than we need them. Certainly events, and respective financial results since then, have borne this out,” Albanese said.

He said that Rio, along with the industry as a whole, faced a number of deep challenges, the most fundamental of which was the need to find big ore bodies in a world hungry for metals.

To step up supply, the industry was being challenged to develop resources that in the past were either considered too complex, or low grade, or in regions with high country risks and poor infrastructure.

“This presents a double whammy, as new skills and technologies are required to develop those resources,” Albanese said. “There is also increased capital intensity and risks in delivering projects on time.”

Other constraints include access to resources such as energy and water, and environmental considerations in new developments.

Regulatory approvals and government demands for a bigger slice of the pie were also becoming increasingly significant barriers to being able to quickly ramp up supply, he said.