Global miner Rio Tinto approved a US$3.1 billion iron ore expansion yesterday, staking a claim to become the world’s top producer and defying industry concerns over a new Australian mining tax.
Iron ore miners are ramping up production to meet booming demand from Asia, with most of the growth in output set to come from Australia where two of the world’s biggest producers, Rio Tinto and BHP Billiton, dominate.
Rio Tinto’s move to boost output by 28 percent follows this week’s demise of a planned joint venture with BHP Billiton in northwest Australia’s Pilbara region aimed at saving the companies US$10 billion in costs.
“Rio and BHP are obviously not taking much notice of the mining tax if they are planning all these investments in iron ore,” said an analyst in Perth, who asked not to be named because he is not authorized to speak to media.
BHP Billiton unveiled a 6 percent rise in quarterly iron ore output yesterday and is also planning to expand its Australian iron ore operations to meet booming Asian demand.
Rio Tinto’s announcement, combined with BHP Billiton’s production surge, eclipsed news reports that suggested they and other miners risked being double-taxed under Australia’s proposed 30 percent tax on iron ore and coal.
Rio Tinto, BHP Billiton and London-listed Xstrata — the big three of Australian iron ore and coal — accuse Canberra of reneging on a guarantee to refund all of the money the miners pay state governments in the form of royalties, newspapers said. Without that guarantee, they could effectively be double-taxed.
But neither industry analysts nor political experts believe the issue will reignite the tax issue and hurt mining investment, and pointed to Rio Tinto’s expansion plan as evidence.
“They see the benefits of selling more iron ore outweighing the extra tax they will have to pay,” the Perth analyst said.
Iron ore prices tracked by Thomson Reuters are near five-month highs, suggesting producers will see higher sales margins. Most ore is sold on a quarterly system based on the previous quarter’s average price.
Rio Tinto’s US$3.1 billion plan would take its annual Australian production to 283 million tonnes a year in 2013 from 220 million tonnes. It plans to boost it further to 333 million tonnes, which could bring it alongside Brazil’s Vale, now the world’s top producer.
BHP Billiton is running at around 125 million tonnes a year, with near-term plans to take that to 155 million tonnes.
BHP Billiton, the world’s biggest miner said it was now running most of its assets at full capacity as suppliers struggle to keep pace with the global appetite for industrial raw materials.
“Despite ongoing uncertainty in the developed world, BHP Billiton remains positive on the prospects for many of its core commodities and the underlying performance of its business due to strength in the emerging economies and the ongoing delay in the supply side response,” it said.
Mining shares fell yestersday, but attention was focused on the possibility of a slowdown in Chinese demand after Beijing raised interest rates for the first time since 2007.
Rio Tinto said last week it produced a record 47.6 million tonnes of iron ore in the quarter and was similarly driving all its divisions near or above capacity to take advantage of an upsurge in mineral prices.
Both Rio Tinto and BHP Billiton had threatened to pull investments in Australia when Canberra first announced its mining tax proposal in May, but struck a truce with the government in July when it agreed to cut the tax to 30 percent from an original 40 percent and narrowed its scope to iron ore and coal mines.
Australian Prime Minister Julia Gillard’s minority government is currently negotiating with miners over final details of the tax which is due to come in from 2012 and raise about A$10.5 billion (US$10.2 billion).
“We’ve said all along we’ll credit existing royalties and scheduled increases, and the policy transition group is going to advise government on the best way to provide certainty to the industry given that policy setting,” Gillard told reporters.
Rio Tinto and BHP declined to comment on the media reports. During the initial fight over the tax, fears over mining investment hurt the local dollar.
Softbank Group Corp plans to keep a stake in the chip designer Arm Ltd, even if it sells a partial interest to Nvidia Corp, the Nikkei reported. The companies are negotiating terms, the newspaper reported, citing sources. Softbank might take a stake in Nvidia after it buys Arm, the report said. Nvidia and Arm might also merge through a share swap, and Softbank would become a major shareholder in the combined company, it said. The two parties aim to reach a deal in the next few weeks, the sources said, asking not to be identified because the information is private. Nvidia is the
END TO SPECULATION: The hotel’s management contract has been extended, despite reports that it wanted to end its alliance with Hyatt Hotels over a deal with Riant Capital Singapore-based Hong Leong Hotel Development Ltd (豐隆大飯店股份) yesterday said it has extended a management contract to ensure the continued presence of the Grand Hyatt brand in Taipei, ending rumors that the two sides were parting ways. “We are pleased Hyatt is able to come to terms on the extension of the management contract of Grand Hyatt Taipei,” said Kwek Leng Beng (郭令明), executive chairman of City Developments Ltd (城市發展) and Millennium & Copthorne Hotels Ltd (千禧國敦酒店). Hong Leong Hotel Development is a subsidiary of Millennium, and both fall under the Hong Leong Group (豐隆集團). The Grand Hyatt Taipei (台北君悅大飯店), owned and built by
Gold surged to a fresh record on Friday, fueled by US dollar weakness and low interest rates, while silver headed for its best month since 1979. Spot bullion is up more than 10 percent this month, as US real yields lingered near record lows. While the ferocity of rallies in gold and silver cooled in the middle of the week, most market watchers predict there might be more gains ahead. Both metals have added about 30 percent this year, with gold and silver exchange-traded funds boosting holdings to a record, as concern about the fallout from the COVID-19 pandemic fuels demand for
MOVING FROM CHINA? The article did not name the company, but Foxconn, Wistron and Pegatron were among firms chosen for a production-linked incentive plan in India An Apple Inc vendor is looking at shifting six production lines to India from China, which could result in US$5 billion of iPhone exports from the South Asian nation, the Times of India reported, citing people familiar with the matter who it did not identify. The establishment of the facility would create about 55,000 jobs over about a year, the newspaper reported, not naming the Apple vendor. It would also cater to the domestic market and expand operations to include tablets and laptops, the newspaper reported. Samsung Electronics Co and Apple’s assembly partners are among 22 companies that have pledged 110 billion