ABC: Rio Tinto warns of more economic upheaval

Publish Date:
16th April 2014

read on ABC news website

Rio Tinto's chairman expects financial market volatility to continue this year, warning the global economy is likely to face more challenges in 2014.

Addressing shareholders at the company's annual general meeting in London, Jan du Plessis outlined international issues likely to impact on the company's operations and results.

"Tensions remain in Europe and the pace of reform and structural readjustments is slow," he said.

"The combination of low interest rates, low growth and low inflation leaves that continent with considerable challenges ... and in the United States, the unwinding of quantitative easing represents unchartered territory."

Mr du Plessis says he also expects short term ups and downs in China, Rio Tinto's major customer.

"While the fundamental drivers of the Chinese economy remain intact, we can expect some variability ... as authorities endeavour to steer the economy along a more sustainable and steady path of growth," he said.

China is due to release its latest official growth figures at 12:00pm (AEST).

Chief executive Sam Walsh says he is taking Rio Tinto "back to the future" after a year of cost cutting, increased production and selling off mines.

Mr Walsh took the helm of Rio Tinto from Tom Albanese early last year after billions of dollars in writedowns.

The mining company's annual report shows Mr Walsh is eligible for a payout of just over $10 million for 2013, up from 2012.

The company took huge writedowns on its aluminium businesses after its ill-timed purchase of Canada's Alcan just before the global financial crisis. 

Mr Walsh says Rio Tinto's aluminium business will continue to operate in a difficult environment.

"Aluminium will improve over time, but at the moment we are stuck with low LME (London Metal Exchange) prices and we've just got to survive through this period," he said.

No help for Energy Resources of Australia

Rio Tinto has also refused a guarantee to help its subsidiary Energy Resources of Australia (ERA) rehabilitate the Ranger uranium mine, which is surrounded by Kakadu National Park in the Northern Territory.

ERA has completed open cut mining and wants to build an underground mine, but it needs to clean up the site first following a toxic spill from a leach tank in December.

Mr Walsh says rehabilitation of the mine site is ERA's responsibility.

"This is a public Australian company and clearly that is an issue for them," he said.

"We are clearly shareholders but it's a matter for all shareholders and a matter for the ERA board."

The miner says it is continuing discussions with the Mongolian Government over the $7 billion Oyu Tolgoi copper mine.

Mr Walsh says he is "relatively confident" of reaching agreement despite shareholder issues.

"All parties have requested an extension of the deadline for the project finance, and I'm hopeful we will receive the approval for that," he said.

Activists and supporters have their say

Environmental groups, pension funds and non-government organisations also attended the AGM to comment on the company's social and environmental record.

Mr du Plessis defended Rio Tinto's investment in the giant Grasberg copper mine in West Papua in Indonesia despite the deaths of more than 30 workers last year in a training tunnel collapse, and what he called "significant challenges" in mine waste disposal.

An activist from Madagascar criticised the company's involvement in a mining project in her country and accused the company of not being transparent about the environmental degradation caused by mining.

Native Alaskan communities praised Rio Tinto for its decision to sell out of the Pebble mine project in south-west Alaska and gift its shareholding to two Alaskan charities.

Kimberly Williams from the Native Alaskan group Caretakers of Our Land told the meeting she was very thankful the company had divested its stake in the copper and gold project.

The Arizona Mining Reform Coalition's Roger Featherstone called on the company to emulate that decision and abandon plans for a $6 billion copper mine in Arizona.

Mr Walsh responded saying there was broad support for the planned underground mine and the company was committed to "vigorous consultation" on the project.

The Resolution project is part owned by Rio and also by BHP Billiton.

Mr du Plessis says the company has no plans for a share buyback at the moment and it plans to continue paying off debt in 2014.