How Rio Tinto played The Australian for fools May 6, 2010 9:57 am, by Possum Comitatus
Today, The Australians above the fold, front page story screams the headline Rio shelves billions in projects
Andrew Burrell and our old mate Dennis Shanahan then spend 1000 words banging on about how Rudds proposed resource rent tax is already killing off projects, with Rio Tinto leading the way.Their starting spiel sets the tone:
Mining giant Rio Tinto has shelved plans to spend $11 billion expanding its massive iron ore operations in Western Australia because of the wave of uncertainty sparked by the Rudd governments proposed tax on super profits.
The problem, of course, is that its complete and utter bullshit.
If Rio had actually made such an $11 billion decision, there would need to be some sort of official ASX announcement, as this is a serious change of plans to Rios business operations that would impact upon the balance sheet of the company and is of primary interests to shareholders.
Yet no ASX announcement has been made.
So here I was this morning, talking with Bernard Keane on twitter, thinking WTF?
SBS provides the first clue to the reality although still falling for the trick being played on them by Rio. They state:
Rio Tinto Iron Ore chief executive Sam Walsh said yesterday that the groups plans to boost Pilbara iron ore production capacity from 230 million tonnes a year to 330 million tonnes by 2015 had been put on hold as the company digested details of the new tax
From the article, Rio CEO Sam Walsh is quoted as saying:
Weve got our projects on hold while we try to understand the ramifications of a 40 per cent increase in taxes
When we evaluate a project, we are looking across the spectrum of peaks and troughs in demand because were looking over a 20- or 25-year period.
Aha! It becomes clearer the smell of lobbying starts permeating the air.
The project isnt actually being canceled that isnt what Rio is saying at all it is merely being put on hold until Rio can understand the ramifications of a 40 per cent increase in taxes. They are saying they are putting on hold plans until they do some further analysis.
This might sound like semantics, but its actually quite important.
Its a lobbying ploy to put pressure on the government over the resource rent tax.If Rio really had actually knocked the project on the head, theyd have to make an official announcement to that end so they feed to a lazy and compliant media the idea that they are going to shelve the investment plans and how its all the governments fault. Yet later, after their convenient analysis is finished, they can continue on with business as usual regardless of what the outcome on the resource rent tax actually is.
And since they are only, factually, in the fine print, saying that they are doing further research on the proposal to help them come to a decision later they dont actually have to make an official ASX announcement and scare the markets.
Rio hasnt actually decided to shelve any investment plan at all they decided to get the lazy hacks at The Australian to do their bidding for them, getting them to tell the public they had shelved the plans, simply to help with their lobbying effort against the new tax. Regardless of whether Rio wins or loses the lobbying effort and regardless of whether the resource rent tax gets introduced or not Rio can continue on with business as usual ( after the conclusion of their further analysis!), including the continued investment in the very iron ore operations that The Oz are currently suggesting will be scrapped.
Business Spectator and Reuters were across this nonsense early. At the first whiff of The Australian headline, they did the proper hard yards that the lazy hacks at The Oz should have done.
The Business Spec article, a must read, starts out:
Global miner Rio Tinto Ltd has denied it had shelved plans to spend $11 billion on expanding its Australian iron ore operations because of the countrys new mining tax.
The worlds second-largest iron ore miner was commenting on a front-page report in The Australian newspaper which quoted Rio Tintos iron ore boss, Sam Walsh, as saying a plan to boost iron ore output to 330 million tonnes a year by 2015 was now on hold.
Mr Walsh said that we need to understand and need greater clarity on what is being proposed, but he hasnt shelved, spokesman Gervase Greene said when queried about the report.
We havent made any investment decision on our next stage of expansion of the Pilbara, Mr Greene said, referring to the massive Pilbara iron ore province of northwest Australia.
Busted!
The Australian was played like a violin by Big Resources or they were being deliberately dishonest in their increasingly hysterical campaign against the Rudd government.
Either way, its a piss poor look for The Oz and a good example of how large companies use the media cycle as a deliberate part of their government lobbying strategies.
In fact, it was little more than Lobbying 101 how any so called professional newspaper could fall for it would be astonishing if it didnt happen so regularly.
UPDATE:
Rio Tinto, finding themselves being too tricky by half, are effectively forced to release an announcement to the ASX (click to expand)
RIO Price at posting:
$65.27 Sentiment: None Disclosure: Not Held
(20min delay)