Mining giant Rio Tinto said it was focused on a massive ramp-up of its Australian iron ore operations yesterday, following the “disappointing” collapse of a lucrative tie-up with rival BHP Billiton.
Rio chief Tom Albanese said both companies had done “everything we could” to get the regulatory approval necessary to merge their iron ore projects in the mineral-rich Pilbara region — a deal they ultimately abandoned on Monday last week.
“Once we heard from the regulators we both recognized this is just getting too hard so we unfortunately — because I’m disappointed — terminated that agreement this week,” Albanese told ABC television. “And we’re moving on — we’re moving on by expanding our operations in the Pilbara.”
Rio announced a US$3.1 billion ramp-up of its Pilbara projects on Wednesday last week, targeting production capacity of 283 million tonnes a year in 2013 and 333 million tonnes by 2015 from 220 million tonnes currently.
“I think the single best thing that we could be doing for Rio Tinto shareholders is to get as many tonnes developed in the Pilbara [as possible] and that’s exactly what we’re doing,” Albanese said.
The iron ore joint venture, estimated to deliver US$10 billion in savings, was the second failed deal with BHP, which made a hostile US$147 billion play for Rio that lapsed in 2008 because of the financial crisis.
It also follows the Anglo-Australian giant’s expensive and hugely unpopular takeover of Canada’s Alcan and snubbing of a US$19.5 billion cash injection from Chinalco in June last year.
Albanese insisted that the company was on track, dismissing suggestions it had been “three strikes” for Rio.
“We have a very strong business — let’s just remember that we had record profits in the first half,” he said. “Let’s also remember that we had cash generation from our operations of nearly US$10 billion in the first half. All of our businesses are running very well.”
A compromise with the Australian government on its proposed “super tax” on mining profits that resulted in a narrowing of its scope and a reduction in the headline rate had paved the way for Rio to grow, he said.
“That has allowed us to make more than 6 billion [US dollars] in investments just in iron ore in Australia since July,” Albanese said.
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