Resource nationalism a curse: Rio CEO Scott Murdoch in Hong Kong From: The Australian March 23, 2011 1:38PM Rio Tinto chief executive Tom Albanese. Source: The Australian
RIO Tinto chief executive Tom Albanese has warned the development of new global resource projects is slowing because of increased government intervention and greater "stakeholder activism" that is halting supply to world markets.
In a speech to the Credit Suisse Asian Investment Conference in Hong Kong, Mr Albanese said the supply of metals and minerals was struggling to keep up with demand, which meant the high prices and increased margins for the miners would be sustained.
The boss of the world's second largest miner said stakeholders - especially governments which took direct stakes in projects- were playing a greater role in the development of new mining plays than ever before.
?The one thing that we, at Rio Tinto, have to do a better job at managing is the curse of resource nationalism,? Mr Albanese said.
?There are stronger profits, stronger margins for a sustained period (but) we see pressures for higher taxes, higher royalties, (and) governments taking a stake in the resources sometimes after the investment has been made. That creates investment uncertainty and that creates a requirement for companies like Rio Tinto to do a better job than we would have in the past to ensure that we end up with something that meets their needs but also does not hinder our investment.?
Mr Albanese gave little indication of Rio?s next move on Riversdale, the target of a drawn-out $3.9bn takeover bid.
Rio this week extended the deadline for its offer in a bid to convince one of the African coking coal miner?s largest shareholders to support the takeover.
Rio has received 35.89 per cent support for the offer, but needs 50 per cent to increase the bid to $16.50 a share.
?It is under bid so I am constrained as to what I can say,? he said.
?Our main focus is on organic growth, growing iron ore and growing the business. From time to time M&A opportunities come up. If they are right, we will stay disciplined.?
Mr Albanese said the Japan earthquake, in the short-term, would not have a ?material effect? on its business in the region. However, he said the crisis would slow the progression of the global nuclear industry, given the Fukushima crisis.
?It?s going to have an impact on sentiment towards nuclear,? he said.
?But if people want to keep the lights on we are going to need coal, iron ore and nuclear ... you aren?t going to be able to replace that with alternative energy.?
In the speech to mostly Asian and US fund managers, Mr Albanese today said Rio would maintain its conservative capital management plan and would not bow to pressure to ?spend, spend, spend?.
?That is not what we do,? he said.
?We are going to be quite prudent to apply those cash amounts that we receive from the higher margins. We have prioritised organic growth on the best quality deposits, the best quality resources that we see in each of the sectors.
?We are expanding iron ore, we think that?s a pretty good thing to do, we are developing copper resources. We do want to look at high quality projects and leveraging off our capabilities.?
Mr Albanese also said alumina was one of the company?s fastest growing resources, despite the disastrous 2007 takeover of Alcan. He said the deal had left the company with significant debt during the global financial crisis which it had only now started to overcome.
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