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Rio Tinto CEO calls for United Nations of the mining world

Mining News - Published on Fri, 18 May 2018

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Reuters reported that Rio Tinto CEO Jean-Sebastien Jacques said resource companies needed to build “the United Nations of the mining industry” to tackle rising resource nationalism and cost inflation. Rising commodity prices typically lead to resource nationalism as they inspire resource-holding nations to demand higher shares of international mining companies’ profits.

At the same time, the miners say increased energy prices and wage demands are driving cost-inflation and eroding profit margins. They also say their profits required years of investment throughout the commodities cycle and their projects provide jobs and tax revenues for host nations.

Mr Jacques said it had previously been the industry model, but the commodities supercycle of sustained high prices at the start of this century had made miners “greedy”.

Mr Jacques said that “Partnerships were seen as value leakage, not as risk mitigation.” Mr Jacques added that “Going forward, we need to spread the risk. In some very challenging jurisdictions, we will have to build the United Nations of the mining industry.”

As one example, he cited Oyu Tolgoi in Mongolia, where Rio Tinto is the operator of a giant underground extension to a copper mine that has the backing of 15 commercial banks as well as money from the international financial institutions, such as the European Bank for Reconstruction and Development.

Even with such protection, tensions have risen between Rio and the Mongolian government over issues such as tax and a power contract.

Asked whether resource nationalism was a threat, Jacques said it was a reality.

Mr Jacques said in a speech to the Miami conference that was webcast “From the Democratic Republic of Congo and South Africa to Mongolia and Australia. It is gaining momentum.”

Mr Jacques added that foreign direct investment was under threat as a result and that “industry margins will come under pressure” from cost inflation.

At the same conference, Anglo American said it was looking at bringing in new parties to develop its copper project at Quellaveco in Chile on which its board is expected to take a development decision over the coming weeks.

Anglo American has said it does not wish to develop greenfield projects alone and is talking with potential partners on Quellaveco, including existing Japanese partner Mitsubishi, which may acquire a bigger stake.

Mr Mark Cutifani CEO said, with reference to miners’ excess spending during the commodity boom that “We, like everyone else, have learnt some lessons.” Mr Cutifani added that “Hence our desire to syndicate this project.”

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Posted By : Rabi Wangkhem on Fri, 18 May 2018
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