RPT-ANALYSIS-Uranium miners press Canada to change Cold War rules – by Rod Nickel (Reuters UK – March 18, 2013)

http://uk.reuters.com/

(Reuters) – Two of the world’s biggest uranium miners, Rio Tinto PLC and Areva SA , are pressing Canada to change a Cold War era policy that curbs foreign ownership of uranium mines.

The campaign, backed by the Australian government, two Canadian provinces and Western Australia-based uranium producer Paladin Energy Ltd, could unlock some of the world’s highest-grade ore for development just as demand for the radioactive element looks to surge.

Unlike Australia, which has no restrictions on uranium-mine ownership, Canada restricts foreign companies from owning more than 49 percent of any uranium mine. There are no ownership restrictions on foreign participation in exploration.

“It’s such an absurd situation,” John Borshoff, managing director of Paladin, said in an interview. It’s “something that is an anachronism from the Cold War”.

Borshoff said the Australian government, Rio Tinto and Paladin are joining forces to lobby Ottawa, while the Canadian provinces of Saskatchewan and Newfoundland and Labrador are also pressing for change.

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Hindalco, Vedanta in race to buy Rio Tinto’s Iron Ore Company – by Dev Chatterjee (Business Standard – March 15, 2013)

http://www.business-standard.com/home-page

Rio Tinto is selling the Canada-based company to reduce its debt

Mumbai – Two of India’s biggest conglomerates, Hindalco, owned by Aditya Birla Group and Vedanta of Anil Agarwal are in race to buy Rio Tinto’s Iron Ore Company based in Canada, bankers say. Apart from these two Indian conglomerates, metal companies from across the world are in the race to buy the company which is valued at close to $1.7 billion.

Bankers said both groups are interested in the company which has iron ore reserves in Canada and a railway line to transport the ore. At present initial talks are on, a banker said. In January, billionaire L N Mittal sold off his 15% stake in several iron ore mines to South Korea’s Posco for $1.1 billion. Rio Tinto has hired Credit Suisse and Canadian Imperial Bank to sell its 59% stake. Rio Tinto is selling the company to reduce its debt.

In an interview to this newspaper, Vedanta Chairman Anil Agarwal had said the group is actively looking at iron ore, oil and gas and coal reserves all over the world. “We want Sesa Sterlite to be as big as Rio Tinto and we will buy energy resources including coal and iron ore reserves wherever we get the right opportunities and valuation,” he had said. Agarwal had not hinted at any specific target but said they are open to all opportunities.

When contacted, a top official of Vedanta group said today they have not made any bid for Iron Ore Company. A Birla spokesperson refused to comment on “market speculation.”

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Profits Drop at Big Five Miners – by Reuters (New York Times – February 12, 2013)

http://www.nytimes.com/

MELBOURNE — Global mining companies are set to unveil their biggest profit decreases in more than a decade and are clearing the decks with multibillion-dollar write-downs on poorly performing assets as they bring in new chief executives.

A sharp drop in commodity prices is likely to have driven down profits for the second half of last year by 40 percent to 50 percent at the top five mining companies when compared with the same period in 2011, forcing them to shelve expansion projects, slash costs and sell assets.

For the top three — BHP Billiton; Vale, based in Brazil; and Rio Tinto — iron ore earnings are likely to cushion losses in coal, aluminum and nickel for the period.

Chief executives are being punished for splurging in the boom years on projects and acquisitions instead of rewarding shareholders more generously, and investors are calling for Rio Tinto and BHP to rethink their policies.

One of the 10 largest shareholders in BHP and Rio Tinto’s Australian-traded stocks said his fund had been pressing both to pay out more of their profit to shareholders. The shareholder, Ross Barker, the managing director of Australian Foundation Investment, said that the companies were not paying higher dividends to shareholders so they could use the funds for investments that would deliver attractive returns.

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Iron Ore Price Crash Looms, Signalling An End To The Commodities Super Cycle – by Tim Treadgold (Forbes – March 13, 2013)

http://www.forbes.com/

Three of the world’s biggest mining companies are heading for a rough ride over the next few years as the once heavily-promoted commodities super-cycle enters its end game. The price of iron ore is tipped to be the next mineral to suffer a sharp price correction as demand for steel in China dries up.

The glut of iron ore developing in the international market is good news for steel consumers such as car makers and builders but will hit the profits of BHP Billiton, Rio Tinto and Vale, the big three of the seaborne iron ore trade.

Between them those three miners account for about 70% of the iron ore imported by China, which has been both a prolific producer and consumer of steel during its hectic construction boom of the past 20 years.

But, over the past few days a string of gloomy steel production and iron ore price forecasts has trimmed the share prices of all iron ore miners with the potential for worse to come if the price projections are accurate. This seems likely given recent falls in the prices of other industrial minerals, including copper, nickel and zinc.

Rio Tinto, the London-based miner with its best assets in Australia, will be hit hardest by the prospect of the iron ore price falling by up to 50% if gloomy economists outside the industry are right, or a slightly less damaging 33% if one of Rio Tinto’s own senior staff is correctly reading his crystal ball.

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Rio Mongolian Mine Failure Would Be ‘Catastrophe,’ Minister Says – by Michael Kohn (Bloomberg.com – March 4, 2013)

http://www.bloomberg.com/

Mongolia’s businesses could face a “catastrophe,” if Rio Tinto (RIO) Group and the government cannot resolve a dispute over funding the Oyu Tolgoi copper and gold mine, the deputy minister for economic development said.

The two parties met last week to decide on financing the project through this year, yet disagreements on taxes, cost overruns and management control resulted in a one-month stop-gap budget. Rio in March will shoulder all the costs for a mine that at full production will account for 30 percent of Mongolia’s economy.

“Rio is funding the project for daily, weekly, monthly operations but not for the big structural investment,” said deputy minister Ochirbat Chuluunbat at a forum in Ulan Bator today. “It will be a catastrophe if it stops.”
Illtud Harri, a Rio Tinto spokesman in London, declined to comment on whether the company was providing all of the funding for the $6.6 billion Oyu Tolgoi mine this month.

Rio controls 66 percent of the project through its unit Turquoise Hill Resources Ltd. (TRQ) and the Mongolian government the rest. The shareholders are squabbling even as the mine is expected to start commercial production by June. Turquoise Hill rallied 10 percent to C$7.25 in Toronto on Friday after news of the month extension.

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Dented by aluminum, Rio Tinto aims to unload Iron Ore Co. – by Andy Hoffman, Boyd Erman and Pav Jordan (Globe and Mail – March 2, 2013)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

VANCOUVER AND TORONTO – More than five years after pulling off the largest takeover in Canadian corporate history, Rio Tinto PLC is still dealing with the pain.

The multinational miner never truly recovered from the massive debt load it took on to buy Alcan in 2007, paying $38.1-billion (U.S.) for the Montreal aluminum producer at the peak of the commodities market.

Burned by a bad bet on the prospects of the metal used to make pop cans, Rio has had to sell billions worth of mining assets to repair its balance sheet. In January, Tom Albanese, the chief executive officer responsible for the Alcan deal and about $14-billion in acquisition-related writedowns during his tenure, resigned and was replaced by the former head of Rio’s iron ore operations, Sam Walsh.

With aluminum prices still failing to recover as much as many of the other commodities Rio produces and with production costs for most operations continuing to increase, Rio and its new CEO are now putting more assets on the block, including the company’s Canadian iron ore operations in Labrador.

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Rio Tinto Said to Clash With Mongolia Ahead of Meeting – by Yuriy Humber and Elisabeth Behrmann (Bloomberg Businessweek – February 26, 2013

http://www.businessweek.com/

Rio Tinto Group’s crucial meeting with Mongolia tomorrow follows weeks of disputes over control of the world’s biggest copper and gold mine under construction, according to two people familiar with the situation.

Financing for the $6.6 billion Oyu Tolgoi mine runs out in three days and tomorrow’s talks to extend the funding come amid allegations of unpaid taxes, and frozen and then unfrozen bank accounts that raise doubts about the project’s future.

Mongolia’s government blocked some of London-based Rio’s bank accounts in the capital Ulan Bator over unpaid tax claims, said the people, who asked not to be named because the information isn’t public. The accounts were unfrozen yesterday, the people said. That move may help improve relations at the talks, one of the people said.

President Tsakhia Elbegdorj this month criticized Rio for cost overruns and said Mongolia wants more control of a project that will represent 30 percent of the economy once in full production. Rio, the world’s second biggest mining company, has considered suspending work until these issues are resolved, two people familiar with the matter said last month. Oyu Tolgoi is scheduled to start production in June.

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Sliding doors at Rio reveal BHP’s future – by Robert Gottliebsen (Business Spectator – February 26, 2013)

http://www.businessspectator.com.au/

To understand what the Andrew Mackenzie era at BHP will mean for the Big Australian you have to delve deep into the folklore of Rio Tinto. The Rio Tinto folklore – which I am sure, is correct – never seemed that important until last week, when Andrew Mackenzie became BHP chief executive officer elect.

Yesterday, I showed how different Andrew Mackenzie is to the BHP CEO’s of the last half-century (Mackenzie’s clean break is bigger than you think, February 25) Now I want to tell the story from a Rio Tinto perspective because this remarkable Australian business tale starts with one of our most successful homegrown executives, Leigh Clifford, who joined Rio Tinto in Broken Hill in the early days of his career.

Rio Tinto has always looked at BHP’s ore bodies with envy. For example, BHP’s Mount Newman is a better iron ore body than Rio’s Hamersley. But Rio Tinto productivity and efficiency has always been ahead of BHP. Indeed, several decades ago it was Rio Tinto that tried to arrange a merger of the two iron ore operations because Rio believed it could transform BHP’s efficiency. And in those negotiations BHP was shocked at just how far ahead Rio Tinto was.

Its unfair and incorrect to attribute that productivity difference to one man, but a big contributor to moulding the high-productivity culture of Rio Tinto was Leigh Clifford who first transformed coal operations. Part of Clifford’s Rio Tinto strategy was to build much stronger bonds between workers and the company thus lessening the influence of unions. There is no doubt that Clifford’s role in the transformation of Rio Tinto was a big driver in him rising to become chief executive of Rio Tinto in London.

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[BHP-Billiton’s] Mackenzie’s clean break is bigger than you think – by Robert Gottliebsen (Business Spectator – February 25, 2013)

http://www.businessspectator.com.au/

I have personally known every BHP chief executive (they used different titles) for the last 50 years. During that time there has never been a BHP chief remotely like Andrew Mackenzie. The company is headed for a period unlike anything in the last 50 years of its history and I suspect this is a once-in-100-year change.

BHP shareholders, employees, and Australian governments need to understand what it means to have Australia’s largest company change direction and become more interested in productivity and shareholder distribution than expansion. The directional change is in part a response to what is happening in China (China will spoil Australia’s energy equation, February 22), the demands of shareholders, and the high cost of capital investment in Australia. The directional change by our largest miner will be followed by others, including Rio Tinto, and heralds a far less expansive Australian mining industry.

And remember the BHP board chose Andrew Mackenzie because they have embraced the plan he put to them as he pitched for the top job. During the last 50 years each BHP chief executive has aimed to leave his successor with more resources. Better productivity and shareholder distribution have always been in the agenda but have been swamped by expansion and other issues.

Andrew Mackenzie is aiming at allocating more money to dividends/capital returns plus lower borrowing so new investment projects will have to be very good. Given the high shareholder payouts and lower gearing agendas of BHP, the Big Australian might even find itself short of capital to do what it would have done without hesitation during most of the last 100 years.

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Rio Tinto’s Canada ore assets may be divested – by Matt Chambers (The Australian/Herald Sun – February 25, 2013

http://www.heraldsun.com.au/

RIO Tinto’s $US1.7 billion ($1.64bn) Canadian iron ore assets could fall under the gaze of new chief executive and former iron ore boss Sam Walsh as he implements a more aggressive stance on sales of non-core or underperforming assets.

Mr Walsh, when asked specifically about the potential sale of the Iron Ore Company of Canada and whether it was considered a core asset, did not rule out a sale.

“I am looking hard at divestments,” Mr Walsh told North American investors in a conference call after the release of full- year earnings earlier this month.

“There are a number of assets for us that are not core or they are underperforming and you have got to say that any asset that falls into that category is going to fall within the radar screen.

“I am not confirming or denying any particular asset but we are going to take a very rational, a very logical approach and, quite frankly, if there are people out there who value these assets more than we do then certainly we will move forward and negotiate that opportunity.”

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With blood in the water, mining’s great white shark is on the hunt – by Eric Reguly (Globe and Mail – February 23, 2013)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

ROME — Beheadings are putting the mining world through something akin to the French Revolution. Mining bosses who landed their jobs in the bubble era – 2006 and 2007 – or did their signature top-of-the-market deals in those years are being fired with alacrity. Or they are announcing their retirements, much to the delight of shareholders grown weary of the value destruction borne of stunningly overpriced takeovers and soaring costs.

The changing of the guard started in the autumn, when Cynthia Carroll said she would quit as chief executive officer of Anglo American. Not long after, BHP Billiton, the world’s top mining company, revealed that it would replace Marius Kloppers, the man who made a wrong bet on shale gas and botched the attempted takeover of Potash Corp. of Saskatchewan (the new CEO is Scotsman Andrew Mackenzie). Last month, it was Rio Tinto boss Tom Albanese’s turn. The biggest sinner of them all, he was knocked off for his boneheaded purchase of Montreal’s Alcan in 2007 for $37-billion (U.S.), most of which has now been written off.

Canadian mining bosses have been frog-marched to the guillotine too – Tye Burt of Kinross Gold and Aaron Regent of Barrick Gold were two of the late 2012 victims. A year earlier, Roger Agnelli was pushed out of Vale, the Brazilian company that paid an eye-watering price for Canada’s Inco.

The last man standing is Ivan Glasenberg, the Glencore International CEO who is about to become the head of the mining and trading colossus to be formed by the merger of Glencore and Xstrata, the Anglo-Swiss miner that owns Falconbridge.

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The White Stuff: Mining Giant Rio Tinto Unearths Unrest in Madagascar – by Jessica Hatcher (Time World Magazine – February 8, 2013)

http://world.time.com/

Fort Dauphin – For five days in January, a few hundred protesters armed with slingshots in Fort Dauphin, Madagascar, blocked the road to one of the country’s largest economic assets, a $940 million mining operation run by the British-Australian company Rio Tinto. Their grievances were local: high unemployment, alleged political corruption and unsatisfactory reimbursement for relocating homes to make room for the mine. But the protest’s effects were global, and relate to anyone who wants to brush their teeth, put on sunscreen or whitewash their house.

Fort Dauphin could have supplied a tenth of the world’s ilmenite, a mineral used to make titanium dioxide, the white pigment commonly found in toothpaste, cosmetics and paint. The product is a staple of household goods in the west and global demand is growing, especially in India and China. But three weeks after the Fort Dauphin standoff, which ended when the Malagasy military dispersed the crowd with teargas, Rio Tinto announced a major scale-back in Madagascar. The company is shelving plans for a second – and larger –mine nearby in St. Luce, which leaves only one of three planned sites in operation.

The cuts mark a potential setback for Madagascar, where 70% of the population lives on less than $1 per day. The African nation has hydrocarbon deposits, gold, and half of the world’s sapphires, and the arrival of mining companies like Rio Tinto brought the prospect of improved economic conditions. But the protesters in Fort Dauphin say the mine exploited them, a charge the company denies.

Fort Dauphin is a small stretch of arable land bordered by mountains and sea in southeastern Madagascar. When Rio Tinto moved in to set up its mine, the only land it could offer in compensation to displaced locals had little agricultural value, so the company gave out cash.

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Rio Tinto drops $4-billion plan for new plant in Bécancour – by Jan Ravensbergen (Montreal Gazette – February 5, 2013)

http://www.montrealgazette.com/index.html

Low titanium prices, belt-tightening torpedo 400-job facility

MONTREAL – Rio Tinto Fer et Titane, a wholly owned subsidiary of global giant Rio Tinto Group, has abandoned plans for a large new plant in Bécancour, the company said Tuesday.

Rio Tinto had been developing a plan to double the capacity of its Sorel-Tracy metallurgical plant, between Montreal and Quebec City, with a “greenfields” project in Bécancour Industrial Park.

The project would have cost in the ballpark of $4 billion. Up to 400 jobs would have been created by 2016. A collapse in titanium prices is one of the prime elements of the decision.

In a statement, Jean-François Turgeon, the unit’s managing director, cited two factors: “a background of weaker market conditions for our products and the need to manage and reduce our costs.” The project would have expanded the company’s mining and smelting capacities in Canada, Madagascar, South Africa and Mozambique, Turgeon said.

“We were conducting pre-feasibility studies on this project here in Canada and in Africa and this work has been suspended,” company spokesperson Bryan Tucker said.

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New heads for a new cycle: Mining giants switch bosses (The Economist – January 26, 2013)

http://www.economist.com/

Why the top posts are changing hands

MINING is a cyclical business. If China’s epic demand for commodities has done much to disguise that fact in recent years, a slew of changes at the top of the big Western mining firms is a timely reminder that it is still true. The latest casualty, Tom Albanese, was shown the door by Rio Tinto on January 17th. His departure is the latest sign that investors reckon a change of leadership is required for the next phase of the cycle.

Rio’s decision comes after Cynthia Carroll said last October that she would step down as boss of Anglo American. A couple of weeks later it was reported that BHP Billiton, the world’s biggest mining company, is seeking a successor to Marius Kloppers, suggesting that he may remain only for another year or so. The terms of a merger between Glencore and Xstrata mean that Mick Davis, Xstrata’s boss, will also soon be looking for a new job.

The clear-out is no coincidence. With the exception of Mr Davis the current crop were all appointed in 2007. If mining bosses have a shelf-life, they may all have reached the end of it. Moreover, none has been entirely successful in profiting from sky-high commodity prices.

Each of the mining giants claims to have been the first to notice the rise of China—which now consumes 40% of the world’s industrial metals—and to have reacted fast. In fact, they were all slow off the mark. The current bosses took office with a remit to catch up. But things have not gone well.

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President Says Mongolia Should Get More Control of Mine – by Michael Kohn & Yuriy Humber (Bloomberg.com – February 5, 2013)

http://www.bloomberg.com/

Mongolia’s President Tsakhia Elbegdorj said the nation should have more control of Rio Tinto Group (RIO)’s Oyu Tolgoi copper and gold project after the government said costs had increased.

The total cost of the Rio Tinto-operated development in southern Mongolia has jumped to $24.4 billion, according to an e-mailed statement from the government, which gave a summary of a Feb. 1 parliamentary discussion attended by the president. London-based Rio had earlier estimated total costs at $14.6 billion, according to the statement.

“It’s time for Mongolia to have Mongolian representation on the management team,” Elbegdorj said at the session on Feb. 1, according to his website. “It’s important that the government takes the Oyu Tolgoi matter into its own hands.”

The president’s comments heighten tension with the second- biggest mining company over the ownership and future development of the project, which is currently the world’s biggest copper mine under construction. Rio is considering a temporary halt to work to protest government demands for a greater share of profit, two people familiar with the plans said last week.

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