Rio Tinto pushes ahead on ore boost
Despite shareholders urging the company to preserve cash, Mr Walsh told analysts in London that the expansion would happen, with the only uncertainties being how quickly it was developed and in what way.
The existing plan is to spend $US5 billion ($5.5 billion) - subject to board approval in November - and push ahead immediately.
While that specific approach is not certain to be approved, it now appears some sort of pathway to 360 million tonnes is certain.
"360 will happen, it will go ahead. The issue is timing and the way we go ahead, but it is a robust project, it's a good project and the market will need the iron ore that comes from this," Mr Walsh said.
He said the company had infinite flexibility around the expansion, meaning it may choose to develop it gradually if it wanted to spread its spending over a larger number of years. "What will drive that expansion will be what the market demands physically need," he said.
"We are going to be very rational and logical about this to ensure we are delivering value to shareholders and not just proceeding with something because it's on the books."
The latter comment is a response to claims that Rio could drag down the iron ore price by increasing its exports too quickly, and ultimately weaken the company's revenues.
Deutsche analyst Paul Young said he supported plans to expand to 360 million tonnes and expected approval before Christmas.
"This project will underpin earnings and dividend growth for years to come," he said.
The shares rose 1.3 per cent to $60.25 on Friday. They have risen about 20 per cent in seven weeks.
Frequently Asked Questions about this Article…
Rio Tinto plans a multibillion‑dollar expansion of its Australian iron ore business to reach 360 million tonnes a year; CEO Sam Walsh has said the company will proceed with the plan, though timing and the exact approach remain flexible.
The existing proposal is to spend US$5 billion (about $5.5 billion) and that specific plan is subject to board approval in November, with at least one analyst expecting approval before Christmas.
According to CEO Sam Walsh, the expansion “will happen” — the company is committed to reaching 360 million tonnes — but the only uncertainties are the timing and the way it’s developed.
Rio Tinto says it has ‘infinite flexibility’ around the expansion and will base the pace and method on physical market demand, possibly developing the project gradually to spread spending over more years.
Yes — some shareholders have urged the company to preserve cash, but management has said it will be rational and deliberate to ensure the expansion delivers shareholder value rather than just proceeding because it’s on the books.
The article notes concerns that boosting exports too quickly could drag down iron ore prices and weaken revenues; Rio Tinto has responded by saying it will be careful about timing and the way it expands to avoid harming value.
Deutsche analyst Paul Young supports the plan, expects approval before Christmas, and says the project will underpin earnings and dividend growth for years to come.
Rio Tinto shares rose 1.3% to $60.25 on the Friday reported in the article and had gained about 20% over the prior seven weeks.
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