Rio Tinto

The Rio Tinto Group, an Anglo-Australian miner needing little introduction, was founded back in 1873. Made up of a consortium of companies who purchased historic copper assets near the Rio Tinto river in Huelva, Spain, the company has since diversified to develop a suite of assets ranging from aluminium, copper, uranium, coal, and diamonds to iron ore and bauxite. A lot of the diversification in the following years was a result from the numerous mergers and acquisitions the company undertook. In brief, these included the RTZ Corporation (formerly The Rio Tinto-Zinc Corporation) which was created in 1962 when The Rio Tinto Company and The Consolidated Zinc Corporation merged. This deal also created CRA Limited (formerly Conzinc Riotinto of Australia Limited) from the Australian assets of The Consolidated Zinc Corporation and The Rio Tinto Company. These companies were unified in 1995, then in June 1997, The RTZ Corporation became Rio Tinto plc and CRA Limited became Rio Tinto Limited, which make up huge Rio Tinto Group we know today.

Rio’s company structure

Since the creation of Rio Tinto Plc and Rio Tinto Limited, the pair is operated as one under the group, but remain as separate legal entities with Rio Tinto plc’s prime stock exchange being London’s LSE, and Rio Tinto Limited listing on the Australian Stock Exchange (ASX) and New Zealand Stock Exchange (NZX). Between these two entities, the group operates the world over, with aluminium in Europe and the Middle East, iron ore, metallurgical coal, bauxite, alumina, uranium, copper, talc and salt in Australia and Asia, aluminium, diamonds, iron ore and titanium dioxide feedstock in Canada, thermal coal, copper, borates and talc in the United States and 30 per cent of the world’s largest copper mine, Escondida, in Chile. It’s a formidable list to cover, but even in brief, demonstrates quite how broad the company’s resource portfolio is, and the vast ground covered by the staff of roughly 35,000 Rio personnel.

Rio in the news

On Monday March 22, Rio executives accused of bribing in China in July, 2009, admitted accepting illegal payments as the trial began in Shanghai. Liu Caikui and Ge Minqiang, Chinese colleagues, and Stern Hu, an Australian Tinto employee who has been highly covered amidst this scandal, admitted taking bribes but contested the amounts, to the tune of  they are accused of accepting. Stern Hu, who headed Rio Tinto’s iron ore operations in China, has been jailed for 10 years and is accused of accepting $946,300 in bribes; the amount in dispute. The other three colleagues received sentences between seven and 14 years, and the case, which has been ongoing since the initial arrests in July, 2009, have thrown Rio into the limelight as the world waits for answers.

“Receiving bribes is a clear violation of Chinese law and Rio Tinto’s code of conduct, The Way We Work. We have been informed of the clear evidence presented in court that showed beyond doubt that the four convicted employees had accepted bribes. By doing this they engaged in deplorable behaviour that is totally at odds with our strong ethical culture. In accordance with our policies we will terminate their employment,” Sam Walsh, CEO of Rio Tinto Iron Ore told press.

“I am determined that the unacceptable conduct of these four employees will not prevent Rio Tinto from continuing to build its important relationship with China,” Tom Albanese, CEO of Rio Tinto said.

With China’s booming infrastructure and constructional developments, it is the largest consumer of iron ore in the world and Rio acted quickly to right its relationship with the country.

New reports since the trial verdict have proved that the implications of the case are very far reaching. Most recently, Rio, along with Vale SA and BHP Billiton, have reduced iron ore supplies to China. This is believed to be an act in retaliation to a recent ruling which requests that Chinese mills do not import material with an iron content of less than 60 per cent. Chinese traders claim that this is the case, saying that these super-powerful miners are using this tactic to control iron ore pricing for the region.

In March, BHP Billiton and Vale agreed quarterly contracts with some Asian steel mills which essentially allowed the companies to assess pricing for each individual quarter where previously a yearly pricing system has been used. In April, Rio followed suit and introduced this same method of safeguarding against market fluctuations.

The Rio strategy

“Rio Tinto aims to maximise the overall return to its shareholders by sustainably finding, mining and processing mineral resources — areas of expertise in which we have a clear competitive advantage. A fundamental part of this is to deliver value while operating in an ethically and socially responsible manner, and remaining committed to long term sustainable development,” the company states.

In going about this, the company is always on the lookout for the next great project to incorporate within the group and commercially realise, “in ways that cannot be easily replicated by competitors.”

By focusing predominantly on large-scale, long-life, economically viable projects, the company invests heavily in order to keep its assets competitive and undertakes lengthy and rigorous analysis before entering or developing upon any venture.

“At Rio Tinto, there is always a suite of quality projects under development or appraisal, and a portfolio of global exploration projects to ensure profitable development opportunities for the future,” the company says.

It’s a rare company that can take a case as severe as the Chinese iron ore bribery scandal and not only survive it, but thrive after it has taken place. Of course, it’s equally rare to become one of the world’s largest and most successful miners. If you are going to take an active interest in the future of the mining industry anywhere in the globe, you have to count Rio Tinto within the mix. This company’s seemingly endless portfolio of projects, subsidiary companies and experts is not a force to be reckoned with, it’s “the” force to be reckoned in the mining industry for the foreseeable future.