* Albanese cites concerns of stakeholder "activism"
* Eyes organic growth, smaller M&A deals
(Recasts, adds background)
By Denny Thomas
HONG KONG, March 23 Rio Tinto
warned the "curse of resource nationalism" has become a major
obstacle to mining projects worldwide as governments have
stepped up efforts to keep control over key commodities.
Rio Chief Executive Tom Albanese, who is fighting to keep
the company's rights to part of Guinea's giant
Simandou iron ore concession, said mining companies need to do
more to tackle moves by governments looking to hike royalties
and taxes, claim bigger stakes in projects or block deals.
From Mongolia to Australia, governments in the past few
years have intervened on more mining-related deals, seeking to
stop or interrupt sales to foreign buyers that would expand the
global supply of such resources as coal and iron ore.
Albanese said executives need to be more
conscious of reaching out to government officials ahead of
cross-border resource deals to highlight potential benefits.
"From a Rio Tinto perspective, we have to do a better job on
the curse of resource nationalism," Albanese told a packed
audience at the Credit Suisse Asia Investment Conference in Hong
Kong on Wednesday.
While technical factors such as hard-to-reach assets in
emerging countries do play a role in limiting supplies, Albanese
said, people can be a bigger obstacle.
"Besides technical constraints, we are also seeing human
constraints. We are seeing a combination of resource nationalism
in some cases," he said, citing "difficult governance" in
"And in countries with good governance and infrastructure,
you have this very new pattern that is increasingly challenging
for our sector of activism of stakeholder engagement," he said.
The global fight for natural resources has intensified in
recent years with the fast growth of emerging markets, leading
to some high-profile cross-border takeovers being blocked by
Last year, the Canadian government killed BHP Billiton Ltd's
$39 billion bid for fertiliser maker Potash
Rio, which invested $680 million in what it said is the
world's largest undeveloped iron ore deposit in Guinea, has been
in dispute with Guinea over blocks 1 and 2, which the government
gave to BSG Resources.
The West African state's top mining official said in October
that Rio had until February to give up its formal rights, or
would risk losing remaining stakes.
Last year, Rio Tinto also fought the Australian government's
planned resource super profits tax, which Albanese called his
number one sovereign risk worldwide at the time.
Rio worked with BHP and Xstrata to convince the
Australian government to cut the tax and limit its application
to iron ore and coal.
COPPER DEMAND STRONG
The chief executive did not shed any new light on the
company's A$3.9 billion offer for Riversdale Mining ,
saying only that emerging market demand was driving the deal.
Albanese told CNBC after the speech that he was restricted
on what he could say on the matter, given that it's a pending
Shareholders of Mozambique-focused coal miner Riversdale
will receive A$16.50 a share if Rio reaches more than 50 percent
acceptances by March 28. The offer reverts to A$16 a share after
that and remains open until April 6.
Albanese said while the long-term demand for copper remained
strong, in the short-term, supply could catch with demand as
Chinese growth is beginning to mature.
"At the demand rate we are seeing now... we could be in an
environment where over the next 20-30 years, the world will
consume as much copper as it consumed through all of human
history," Albanese said.
Big miners such as Rio and BHP have benefited from strong
metals demand from rapidly growing emerging economies such as
China, India and Brazil.
Albanese said the focus for Rio is to spend its vast cash
flow to expand into iron ore, develop new copper resources and
to grow "organically."
He sounded a note of caution on big mergers and acquisitions
to drive growth, saying most of the assets being pitched are not
of high quality. Rio will limit its deal making to smaller
targets, Albanese said.
Rio Tinto mines 225 million tonnes of iron ore annually,
mostly in the Pilbara region of Australia, making it the world's
No.2 producer behind Brazil's Vale SA .
Rio said on Tuesday tight global iron ore supplies could be
stretched even further as Japan embarks on a massive
reconstruction following the earthquake and tsunami.
(Additional reporting by Sonali Paul and Donny Kwok; Editing by
Michael Flaherty and Vinu Pilakkot)