The Rising Influence of Rising Affluence

[DewDiligence]

Rio Tinto CEO Decries “Resource Nationalism”

[No kidding.]

http://www.reuters.com/article/2011/03/23/rio-idUSL3E7EN04E20110323

›Wed Mar 23, 2011 2:13am EDT
By Denny Thomas

HONG KONG, March 23 (Reuters) - Rio Tinto's chief executive said increased government involvement in the resources sector is constraining efforts to meet demand across the globe and slammed what he called the "curse of resource nationalism."

CEO Tom Albanese, who is under pressure to give up the company's rights to part of Guinea's giant Simandou iron ore concession, said Rio needs to do a better job of liaising with the governments at a time when the miner is facing pressures of higher taxes and royalties.

"From a Rio Tinto perspective, we have to do a better job on the curse of resource nationalism," Albanese told a packed audience at the Credit Suisse Asia Investment Conference in Hong Kong on Wednesday.

Albanese said the supply is hampered by a combination of technical and human factors. On the technical side, he said in certain cases resources are in deep and difficult locations in emerging countries.

"Besides technical constraints, we are also seeing human constraints. We are seeing a combination of resource nationalism in some cases," he said, citing "difficult governance" in certain countries.

"And in countries with good governance and infrastructure, you have this very new pattern that is increasingly challenging for our sector of activism of stakeholder engagement," he said.

The fight for natural resources has intensified over the past few years, leading to some high-profile cross-border takeovers being blocked by governments.

Last year, the Canadian government killed BHP Billiton Ltd's $39 billion bid for fertiliser maker Potash Corp .

Rio, which invested $680 million in what it said is the world's largest undeveloped iron ore deposit in Guinea, has been in dispute with Guinea over blocks 1 and 2, which the government gave to BSG Resources.

Last year, Rio Tinto also fought the Australian government's planned resource super profits tax, which Albanese called his number one sovereign risk worldwide at the time. Rio worked with BHP and Xstrata to convince the Australian government to cut the tax and limit its application to iron ore and coal.

COPPER DEMAND STRONG

The chief executive did not shed any new light on the company's A$3.9 billion offer for Riversdale Mining , saying only that emerging market demand was driving the deal. Albanese told CNBC after the speech that he was restricted on what he could say on the matter, given that it's a pending transaction.

Mozambique-focused coal miner Riversdale's shareholders will receive A$16.50 a share if Rio reaches more than 50 percent acceptances by March 28. The offer reverts to A$16 a share after that and remains open until April 6.

Albanese said while the long-term demand for copper remained strong, in the short-term, supply could catch with demand as Chinese growth is beginning to mature.

"At the demand rate we are seeing now...we could be in an environment where over the next 20-30 years, the world will consume as much copper as it consumed through all of human history," Albanese said.

Big miners such as Rio and BHP have benefited from strong metals demand from rapidly growing emerging economies such as China, India and Brazil.

Albanese said the focus for Rio is to spend its vast cash flow to expand into iron ore, develop new copper resources and to grow "organically."

He sounded a note of caution on big mergers and acquisitions to drive growth, saying most of the assets being pitched are not of high quality. Rio will limit its deal making to smaller targets, Albanese said.

Rio Tinto mines 225 million tonnes of iron ore annually, mostly in the Pilbara region of Australia, making it the world's No.2 producer behind Brazil's Vale SA .

Rio said on Tuesday tight global iron ore supplies could be stretched even further as Japan embarks on a massive reconstruction following the earthquake and tsunami.‹