LONDON (Reuters) – Rio Tinto (RIO.L) (RIO.AX) 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.
Asked at a conference hosted by BAML in Miami, whether forming partnerships was the answer, Jacques said “absolutely”. He 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”.
“Partnerships were seen as value leakage, not as risk mitigation,” he said. “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.”