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RIO TINTO MAKES IT TOUGH FOR BHP

Albanese says Rio's iron ore resources in Guinea are high-quality

Friday May 30,2008

By Andrew Johnson, Associate City Editor

Mining giant Rio Tinto beefed up its bid defence against rival BHP Billiton by flagging up plans to meet a doubling in global metal demand by 2022.

The company believes the industrial revolutions in China and India have created a “supercycle” in commodities, a boom set to last for at least 15 years.

Its new projects will help to ensure Rio can keep pace and hit production targets of 8.6 per cent a year until 2015. Rio’s shares rose 43p to 6180p.

The moves are designed to increase the pressure on BHP, which has launched a hostile, all-paper merger proposal to create a mining juggernaut worth more than £200billion.

Insiders said the projects showed there was a lot more value to come from Rio. Customers and competition authorities are concerned about a merged group’s dominance, especially in iron ore. European regulators are expected to give their verdict soon on whether the deal can go ahead and if sell-offs are needed.

Rio chief executive Tom Albanese described one of the company’s projects as “without doubt, the top undeveloped iron ore asset in the world”.

Simandou in Guinea, West Africa, had 2.25billion tons of exceptionally high-quality iron ore resources, Albanese said. Production would start in 2013 and iron ore production would rise from 170million tons today to 320million tons then.

Rio is also planning its first move into nickel mining. Albanese said the Sulawesi project in Indonesia had resources of 162million tons and two copper projects in Peru and Arizona, US, had combined resources of 4.1billion tons.

Insiders believe there is more to come from the projects. “This is just the tip of the iceberg,” said one.

Shareholders concluded there was little in yesterday’s news that would make them change their minds on the company. “Really, the focus is now on the submissions for the competition authorities,” said one.

One sticking point for Rio is the global shortage of expert staff and mining equipment. It has teamed up with Imperial College, London, to find new ways of mining.

* Copper miner Antofagasta saw underlying earnings rise 32 per cent to £412million on the back of high prices for the first quarter to March.