Rio Tinto looks set to push ahead with $US5 billion worth of expansion plans at its iron ore business in the Pilbara, despite growing calls for the money to be redirected to shareholders.
While confirmation of the expansion will not come until a board decision is taken in the December quarter, comments made at Rio's annual meeting of Australian shareholders suggest management is inclined to approve the project.
The expansion would result in Rio's iron ore exports rising from 290 million tonnes a year to 360 million tonnes a year, and some commentators are concerned the extra supply could help force down iron ore prices.
The fund manager in control of the second-biggest holding of Rio shares, BlackRock's Evy Hambro, said a cancellation or deferral of the expansion would be consistent with the culture of reducing costs and increasing shareholder returns that has been promised by Rio's new chief executive Sam Walsh.
Mr Hambro said he looked forward to meeting with Rio's management team to further explore the exact "dynamics behind that investment".
But speaking at the meeting in Sydney on Thursday, Mr Walsh indicated that expansion plans would remain on track so long as market conditions did not deteriorate significantly.
"We need to invest in the best projects, these need to be robust projects, and in the Pilbara we do come with an advantage that we are the lowest-cost producer proximate to the largest growth market [China]," he said.
Rio chairman Jan du Plessis hinted that he too was inclined to allow more money to be spent in the Pilbara, saying the iron ore division would be "given the capital they need", despite a broader desire to diversify the company beyond its heavy reliance on iron ore.
Mr Walsh said Rio had considered the merits of diversifying into gas, but had decided to stick to its existing areas of expertise.
Shareholders voted to accept a new remuneration system that judges bonuses over a longer period and includes a provision to allow the retrospective clawback of bonuses paid.
The Rio chief executive will now be forced to own more of the company's shares than before.
All directors were reappointed, despite calls for more mining experience to be introduced to the board following the disastrous aluminium and coal acquisitions made during the tenure of former chief executive Tom Albanese. Several members of Rio's board served through those failed acquisitions, but Mr du Plessis defended them, saying the experience made them better directors.
Mr du Plessis promised shareholders that boardroom renewal was imminent.
"I really am hoping that we will invite another two, maybe three, new directors on to the board over the next year," he said.
Mr du Plessis said at least one of the new directors would have mining experience.
Rio Tinto faces balancing act — Elizabeth Knight, Page 32