Rio Tinto looks set to push ahead with $US5 billion 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 won't come until a board decision 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 see Rio's iron ore exports rise from 290 million tonnes per year to 360 million tonnes per 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 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 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]."
Rio chairman Jan du Plessis hinted 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 their retrospective clawback. The Rio chief executive will now be forced to own more of the shares.
All directors were reappointed, despite calls for more mining experience on the board after the disastrous aluminium and coal acquisitions made during former chief executive Tom Albanese's tenure. Several members of Rio's board served through both those acquisitions, but Mr du Plessis defended them against suggestions they should be sacked, saying the experience had made them better directors.
He promised shareholders 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, and at least one would be Australian.
He said only "one or two" of the directors present during the Alcan purchase were likely to remain on the board by the end of 2014.