Rio pulls back from diamond asset sale
by:MITCHELL BINGEMANN
From:The Australian
June 17, 201312:00AM
RIO Tinto chief executive Sam Walsh has dampened prospects that the mining giant is ready to sell its $US2 billion-plus diamond business as part of plans to rid the company of more than $US13 billion ($13.7bn) in underperforming and non-strategic assets.
In his first interview since taking over at the mining giant at the start of this year, Mr Walsh said Rio would not jump into a fire sale of its underperforming assets or specifically its diamond arm. He would focus on cutting costs from other parts of the business.
"This is not market day at the bazaar. I'd be quite happy to keep it," Mr Walsh told Britain's The Telegraph.
Before Mr Walsh's promotion Rio had said it would sell its diamond business. Canada's Dominion Diamond emerged as a favoured candidate to buy the business, saying it was interested in Rio's 60 per cent stake in the Diavik diamond mine in Canada's Northwest Territories.
But Mr Walsh said he would focus on excising costs from other parts of the business as it continued to exit its underperforming aluminium and nickel lines and focus more on iron ore demand from Asia.
"Costs have blown out and we need to get them back to a more sensible level," he said.
"This is about improving underperforming businesses as much as clawing back increases that we, and others, have been exposed to during the heady days of the commodities cycle."
Iron ore sales accounted for $US24bn of Rio's $US56bn revenues last year, but as China's economic growth cools Mr Walsh said the mining giant would increasingly look to Southeast Asian growth markets to counter slowdowns in other regions.
"We have some very good iron assets and I don't see that as being overly exposed. Some people would give their eye teeth to have them," Mr Walsh said.
"China has still got a way to go. Beyond China, India is going to get a move on. You've got 1.2 billion people there who are going to want the same things that the Western world has got."
Mr Walsh listed Indonesia, Vietnam, The Philippines, South America, Africa and others as key regions that would require more iron ore as they increasingly industrialised.
"I'm not saying (they will grow) at the same pace, but our view is that as China growth starts to flatten -- here we are talking 2025, 2030 -- we will see these other countries take their place in the sun," he said.
"That will provide continuity for our business. The sort of things we supply -- there are no substitutes. If you want to urbanise, industrialise, you need steel, you need copper, you need aluminium."
Mr Walsh also said the company was not looking at any acquisitions in the near term.
"I don't see our portfolio as being an issue where I've got to race out and do silly things because some analyst somewhere has written about the extent of diversification. The business is what the business is," he said.