In its latest defensive salvo to ward off the proposed $178 billion takeover bid from BHP Billton, Rio Tinto has decided attack is the best form of defence as it outlines where it sees itself going over the next decade and what this means in terms of long term growth.
The company's CEO, Tom Albanese and his senior management team are telling investors of its investment plans over the next few years, which involves the expansion of its existing operations and a strong pipeline of greenfield projects, and will also set out the internal valuation methods which the company uses to assess its future growth options.
Overall, the company says it anticipates annual growth compounded at 8.6 percent up until 2015 which would effectively almost double the company's earnings over the period.
The company is highlighting a number of already-announced major projects and reserve expansions which will help it achieve this goal. Notable among these are:
- The Simandou project in Guinea announced new resources of 2.25 billion tonnes of iron ore
- La Granja project in Peru announced 2.8 billion tonnes of inferred copper resources at 0.51 per cent copper and 0.1 per cent zinc
- Resolution project in Arizona, USA, announced 1.3 billion tonnes of inferred resources containing 1.51 per cent copper and 0.04 per cent molybdenum
- Sulawesi Nickel project yesterday announced 162 million tonnes lateritic nickel inferred resource with potential for further mineralisation through further exploration.
- In addition, Kennecott Utah Copper last week announced an upgrade of resources to 637 million tonnes at 0.48 per cent copper at its Bingham Canyon mine
Demand growth remains strong reckons Albanese and, combined with supply side constraints, this means there has never been a time at which our options for expansion have been so valuable. With world demand for our products set to double by 2022, we have the reserves and resources in place to keep pace with the market.
Rio Tinto has a clear roadmap to deliver industry leading growth over the next few years, but this is just the beginning. Rio Tinto will continue to unlock value from tier one assets that are unrivalled in the sector.
On the exploration and development front, Rio has a number of greenfield opportunities it sees as extremely promising. These include nickel in Minnesota US, coking coal in Mongolia and western Canada, diamonds in India, potash in Saskatchewan and lithium in Serbia as well as brownfield coking coal and uranium opportunities.
Interestingly no mention is made of the giant Oyu Tolgoi copper/gold project with Ivanhoe Mines in Mongolia, where development is well under way, but a go-ahead awaits a clarification of that country's mining code and tax/royalty structure. However the list noted above is by no means a comprehensive one as there are numerous other Rio Tinto expansions and projects already in the pipeline.
While Rio's shares rose on the announcement, they are currently valued some 7 percent below BHP Billiton's 3.4 shares for each Rio Tinto share offer, but the company continues to tell shareholders that the bid undervalues it. However the future of the takeover proposal doesn't just hang on shareholder approvals. Anti-trust and monopoly matters and negotiations could still scupper a merger so there's still a long way to go in this takeover battle