Rio Tinto comfortable with Australia project

Thursday, 30 Jun 2011

Reuters reported that Rio Tinto chief executive is comfortable with the company multibillion-dollar project budgets in Australia where labour and input and services costs were all increasing.

The comment from Chief Executive Mr Tom Albanese came after rival BHP Billiton and Woodside Petroleum both recently announced cost blowouts on projects in Australia.

Rio Tinto biggest investment is a USD 14.8 billion expansion of its iron ore capacity to 330 million tonnes a year which it expects to complete by the first half of 2015.

Mr Albanese said at a business lunch that "I'm comfortable that our budgets in Australia are being managed appropriately. He said one of the challenges to managing budgets was the strength of the Australian dollar. With costs incurred in Australian dollars any increase is magnified when translated into US dollars, Rio reporting currency.”

Mr Albanese reiterated that the long term outlook for Rio Tinto is strong, supported by demand from rapidly developing countries like China, India, and in Southeast Asia, but there will be a range of challenges, including economic uncertainty.

He said that "We're going to climb a wall of worry over the next 10 years. In the meantime, the long term picture continues to be sound."

Mr Albanese said he expected uranium demand to continue growing, but at a slower rate than before the Fukushima nuclear plant crisis in Japan, as countries delayed new nuclear plants or phased them out as Germany plans to do.

He said that "For us that means maybe the growth rate of uranium could be slower than it was pre-Fukushima. He added that as long as countries went ahead and put a price on carbon, then there would be a push towards building new nuclear capacity.

Despite a recent dip in spot iron ore prices, Rio Tinto iron ore chief, Mr Sam Walsh said the company was not seeing any drop in demand. He said that "We've got healthy queues at both of our shipping areas."

He added that "Importantly we're also seeing strong demand from Japan, Korea and Taiwan. So the business is continuing to run flat out."

(Sourced from Reuters)