Anglo-Australian miner Rio Tinto warned yesterday of the risk of “ongoing disruption” to the global economy, but said it remained confident of long-term Asian demand for its raw materials.
Chairman Jan du Plessis said the company was cautious about the near-term economic outlook, citing volatility caused by Europe’s debt problems and inflationary pressures in Asia.
“Asian countries are having to contend with inflationary risks arising from the massive economic stimulus packages that were put in place last year,” he told the company’s annual general meeting.
“At the same time, we have seen the recent sovereign debt crisis in Europe and its sweeping contagion into financial markets around the world,” he said.
“This illustrates the potential for persistent economic imbalances and hidden risks to cause ongoing disruption to global economic activity,” du Plessis said.
Chinese demand for iron ore, copper, coal and aluminum, however, was expected to continue growing over the next 15 years, at which point higher demand from India was expected, he said.
“The long-term outlook therefore continues to make our business an attractive proposition,” he said.
Rio said its iron ore division, the largest contributor to underlying earnings, achieved a record performance last year despite the global financial crisis and weather-related interruptions.
Chief executive Tom Albanese said: “The outlook for global iron ore remains very positive and growth fundamentals remain the same as before the financial crisis, dominated by the rise of China.”
He said despite the worst downturn since World War II, the factors driving the developing world’s industrialization remained in place and the company expected demand for iron ore, aluminum and copper to double by 2025.
“We also expect substantial increased demand for energy,” Albanese said.
Executives from Rio Tinto, one of the world’s biggest miners, also repeated their attacks on Australia’s proposed retrospective 40 percent tax on the “super profits” of resources companies.
Du Plessis accused the government of a “scandalous” misrepresentation of the issue during rowdy debate in recent weeks.
“Applying this tax retrospectively is a dangerous prospect and has the potential to destroy Australia’s hitherto excellent reputation in the global community,” he said.
However, a group of prominent Australian academics and economists yesterday came out in support of a proposed 40 percent tax on mining profits, as Rio Tinto warned it could “destroy” the nation’s reputation.
The former head of Australia’s competition regulator, Allan Fels, was among the 21 signatories to an open letter commending the Resources Super Profits Tax (RSPT) as “consistent with economic theory” and international models.
“The RSPT will reduce the profitability of mining companies and the value of the exploration and mining rights allocated to them by Australian governments on behalf of the public,” the letter said.
The signatories, which also included Michael Keating, the former head of the public service and prime minister’s department, said it was appropriate to debate “modifications to the design” of the tax, but its basis was solid.
“The current public criticism of the proposed tax has been dominated by misinformation,” the letter said.
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