By Alex MacDonald
LONDON--Mining titan Rio Tinto PLC (RIO) has no major mergers
and acquisition plans in the works, preferring to focus on building
new mines rather than buying low-quality assets in the current
market environment, said the company's chief executive
Thursday.
"If you look at what is available, there are a lot of
distressed, high cost projects. That is not what we would like,"
Sam Walsh told journalists on a call. He noted that the company is
interested in Tier 1 assets--those that are high quality, low cost,
and large. He noted, however, that there aren't any assets that met
those requirements and, if there were, they would be hotly
contested.
Rio Tinto, the world's second-largest diversified miner by
market capitalization Thursday reported a bumper 78% rise in last
year's net income compared with an impairment-weighted net profit a
year before. The strong earnings and asset sales helped the company
reduce its net debt to $12.5 billion from $18.1 billion the year
before and announce a $2 billion share buyback in addition to a
notable dividend rise.
Mr. Walsh said that shareholders have enquired whether the
company had any interest in mergers and acquisitions, with some
enquiring whether the Anglo-Australian might consider approaching
Freeport-McMoRan Inc. (FCX) or diversified miner Anglo American PLC
(AAL.LN). "We are not doing that," he said. "We are not working on
any major M&As," he noted. He also said that shareholders had
dismissed the idea that Rio Tinto would give Glencore PLC (GLEN.LN)
"any air at all" to consider a tie-up. Glencore is barred from
making an approach until April after Rio Tinto rebuffed the mining
giant's informal approach last year.
Rio Tinto is reviewing whether to build new mines or buy assets
given the current commodities environment. Mr. Walsh noted that it
currently doesn't make sense for Rio Tinto to buy because the
assets that are up for sale tend to be low quality, high cost
operations.
Rio Tinto plans to grow its output by 5% a year in copper
equivalent terms through to 2019. The growth stems from a range of
large projects, including the development of an underground mine at
the massive Mongolian Oyu Tolgoi copper-gold deposit and the
continued expansion of iron ore operations in the Pilbara region of
Western Australia.
Mr. Walsh said that talks are still ongoing with the Mongolian
government to settle all outstanding concerns about the development
of the underground Oyu Tolgoi mine. Rio Tinto made a final offer to
the Mongolian government in November, Mr. Walsh said but indicated
that it didn't include an offer to increase it's stake in the mine.
"We're happy with the shareholding we have," he noted. Rio Tinto is
the project operator at Oyu Tolgoi and owns a controlling stake in
Turquoise Hill Resources Ltd (TRQ.T), which in turn owns a 66%
stake in the Oyu Tolgoi project. The Mongolian government owns the
remaining stake.
Mr. Walsh also said that Rio Tinto wouldn't take part in any
upcoming tender process for blocks 1 and 2 of the massive Simandou
iron ore deposit. Guinea's mining minister said this week that the
government plans to auction the northern half of the massive
Simandou iron-ore deposit in the next few months. "This is a high
grade deposit and I don't quite think that the government of Guinea
wants to have a single producer" for the entire deposit, he said.
Rio Tinto is already developing blocks 3 and 4 of the deposit.
-Write to Alex MacDonald at alex.macdonald@wsj.com
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