Rio Tinto
THE manacles strangling Rio Tinto’s Australian focus may have been removed, enabling the miner’s $200m (£130.9m) investment in Western Australia to go-ahead, but in reality the 40 per cent super-tax, since reduced to 30 per cent, was just a distraction.
The dredging at its Cape Lambert mine in the Pilbara will help to boost production from a planned 230m tonnes capacity a year by 2012 to 330m tonnes in 2016.
But this is just a sideshow. China is and will remain the main affair. Chief executive Tom Albanese’s warning that there would be little immediate respite from uncertainty surrounding Chinese demand rings alarm bells. The Asian nation accounted for almost a quarter of its revenue in 2009, 24.3 per cent of its total sales compared to 18.8 per cent a year earlier, and is now its largest single market.
China is the world’s largest iron-ore consumer. Any slowdown in Chinese demand, as suggested by recent data, will hit Rio’s profits hard. Albanese maintains that the long-term outlook is positive, but shareholders betting on a share price recovery are really taking a punt on Chinese growth, not Rio Tinto.