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Rio trouncing tough to explain
Email Print Normal font Large font Jamie Freed
August 2, 2007

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AdvertisementFOR once, Anglo American has blown Rio Tinto out of the water.

Rio's chief executive, Tom Albanese, will be forced to explain tonight to investors why his company has apparently lost one of its key copper development projects to a competitor as he reports an expected $US3.7 billion half-year profit.

The newly aggressive Anglo-South African mining group last night sealed a deal to earn a 50 per cent stake in the Pebble copper-molybdenum project in Alaska in return for a staged investment of $US1.4 billion.

Since last June, Rio had acquired a 19.9 per cent stake in Pebble's owner, Canadian-listed Northern Dynasty Minerals, and was talking up the project in presentations.

In a recent report, Citigroup deemed Pebble one of Rio's key copper development projects, along with Oyu Tolgoi in Mongolia, Resolution in the US and La Granja in Peru. The low-grade Pebble deposit contains an inferred resource of 7.5 million tonnes of copper and 26.5 million ounces of gold.

But although Northern Dynasty cut an equity deal with Rio last June, it did not stop talking with other parties about taking an interest in the Pebble project.

"We've been in talks for a number of months on a confidential basis," an Anglo spokeswoman said. Rio spokesman Ian Head last night confirmed his company had been interested in taking a stake in the project, but he noted Rio's equity interest meant it effectively retained 10 per cent of Pebble. "This is a competitive process," he said. "We won't win them all. But we're not willing to pay over the odds. Rio Tinto will stick with value-enhancing propositions.

Anglo's win over Rio breaks its precedent of losing out to the Anglo-Australian in bidding wars over iron ore miner North, diamond miner Ashton and Gina Rinehart's Hope Downs iron ore project.

Under the leadership of its new American chief executive - former Alcan primary metals boss Cynthia Carroll - the traditionally conservative Anglo has taken a more aggressive path.

Just last year, Anglo was viewed as a potential takeover target for Rio or Xstrata, but it has recently made some copper and iron ore project acquisitions of its own.

There has also been a changing of the guard at Anglo since Ms Carroll took the helm. Former base metals head Simon Thompson left to become the chairman of Russia's Rusal. This week, Angloplat boss Ralph Havenstein announced his resignation due in part to difficulties in meeting Ms Carroll's higher safety standards.

Also this week, AngloGold appointed an Australian, former Sons of Gwalia's Mark Cutifani, as its new chief executive.