The
Rio Tinto Group is a diversified,
multinational
mining and resources group with
headquarters in London and Melbourne.
The company was
founded in 1873, when a multinational consortium of investors
purchased a mine complex on the Rio Tinto
river, in Huelva
, Spain from
the Spanish government. Since then, the company has grown
through a long series of mergers and acquisitions to place itself
among the world leaders in the production of many commodities,
including aluminium, iron ore, copper, uranium, coal, and diamonds.
Although primarily focused on extraction of minerals, Rio Tinto
also has significant operations in refining, particularly for
refining bauxite and iron ore. The company has operations on six
continents but is mainly concentrated in Australia and Canada, and
owns gross assets valued at $81 billion through a complex web of
wholly and partly owned
subsidiaries.
Rio Tinto Group is a
dual-listed
company traded on both the
London Stock Exchange where it is a
component of the
FTSE 100 Index and
the
Australian Securities
Exchange where it is a component of the
S&P/ASX 200 index. As of March, 2009,
Rio Tinto is the fourth-largest publicly listed mining company in
the world with a
market
capitalization of approximately $34 billion, and was listed in
Fortune magazine's 2008
Global
500 ranking of largest worldwide companies by revenue at number
263. Although the company has a long record of producing profitable
operating results and favorable investment returns, the company's
2007 acquisition of Canadian aluminium company
Alcan burdened Rio Tinto with substantial
debt.
History
Formation
Hugh Matheson led the purchase of the
Rio Tinto mines from Spain, and was the company's first
president.
Since
antiquity, a site along the Rio Tinto, in the Andalusian
Province of
Huelva in Spain has been mined for copper, silver, gold, and other minerals. Approximately 3,000
BC, Iberians and Tartessians began mining the site, followed by the
Phoenicians
, Greeks, Romans, Visigoths, and
Moors. After a period of abandonment,
the mines were rediscovered in 1556 and the Spanish government
began operating them once again in 1724.
However, Spain's mining operations there were inefficient, and the
government itself was otherwise distracted by political and
financial crises, leading the government to sell the mines in 1873
at a price later determined to be well below actual value.
The purchasers of the mine were led by
Hugh Matheson's Matheson and
Company, which ultimately formed a syndicate consisting of
Deutsche Bank (56% ownership), Matheson (24%),
and railway firm Clark, Punchard and Company (20%). At an auction
held by the Spanish government for sale of the mine on February 14,
1873, the group won with a bid
GB£3,680,000 (
ESP 92,800,000). The bid also specified that
Spain permanently relinquish any right to claim
royalties on the mine's production. Following
purchase of the mine, the syndicate launched the Rio Tinto Company,
registering it on March 29, 1873.
Operating history
Following their purchase of the Rio Tinto Mine, the new ownership
constructed a number of new processing facilities, innovated new
mining techniques, and expanded mining activities. From 1877
through 1891, the Rio Tinto Mine was the world's leading producer
of copper.
The open-pit Corte Ayala mine was part
of Rio Tinto's original operations in Spain.
From 1870 through 1925, the company was inwardly focused on fully
exploiting the Rio Tinto Mine, with little attention paid to
expansion or exploration activities outside of Spain. The company
enjoyed strong financial success until 1914,
cooperating with other pyrite producers to control
market prices. However,
World War I and
its aftermath effectively eliminated the United States as a viable
market for European pyrites, leading to a decline in the firm's
prominence.
The company's failure to diversify during this period led to the
slow decline of the company among the ranks of international mining
firms. However, this changed in 1925, when Sir
Auckland Geddes succeeded
Lord
Alfred
Milner as chairman. Geddes and the new management team he
installed focused on
diversification of the
company's investments and operations and reformation of marketing
strategy. Geddes led the company into a series of
joint ventures with customers in the
development of new technologies, as well as exploration and
development of new mines outside of Spain.
Perhaps most significant was the company's investment in copper
mines in
Rhodesia, which it eventually
consolidated into the
Rhokana
Corporation. These and later efforts at diversification
eventually allowed the company to divest from the Rio Tinto mine in
Spain. By the 1950s,
Franco's
nationalistic government had made it increasingly difficult to
exploit Spanish resources for the profit of foreigners. Rio Tinto
Company, supported by its international investments, was able to
divest two-thirds of its Spanish operations in 1954 and the
remainder over the following years.
Major mergers and acquisitions
Like many major mining companies, the Rio Tinto Group has
historically grown through a series of mergers and
acquisitions.
Early acquisitions
The company's first major acquisition occurred in 1929, when the
company issued stock for the purpose of raising 2.5 million pounds
to invest in Rhodesian copper mining companies, which was fully
invested by the end of 1930. The Rio Tinto company consolidated its
holdings of these various firms under the Rhokana Corporation by
forcing the various companies to merge.
Rio Tinto's investment in Rhodesian copper mines did much to
support the company through troubled times at its Spanish Rio Tinto
operations spanning the
Spanish Civil
War,
World War II, and Franco's
nationalistic policies. In 1950s the political situation made it
increasingly difficult for mostly British and French owners to
extract profits from Spanish operations, and the company decided to
dispose of the mines from which it took its name. Thus, in 1954 Rio
Tinto Company sold two thirds of its stake in the Rio Tinto mines,
disposing of the rest over the following years. The sale of the
mines financed extensive exploration activities over the following
decade.
Merger with Consolidated Zinc
The company's exploration activities presented the company with an
abundance of opportunities; however it lacked sufficient capital
and operating revenue to exploit those opportunities. This
situation precipitated the next, and perhaps most significant,
merger in the company's history. In 1962 Rio Tinto Company merged
with the Australian firm
Consolidated
Zinc to form the Rio Tinto – Zinc Corporation (RTZ) and its
main subsidiary, Conzinc Riotinto of Australia (CRA). The merger
provided Rio Tinto the ability to exploit its new-found
opportunities, and gave Consolidated Zinc a much larger asset
base.
RTZ and CRA were separately managed and operated, with CRA focusing
on opportunities within
Australasia and
RTZ taking the rest of the world. However, the companies continued
to trade separately, and RTZ's ownership of CRA dipped below 50% by
1986. Strategic needs of the two companies eventually led to
conflicts of interest regarding new mining opportunities, and
shareholders of both companies determined a merger was in their
mutual best interest. In 1995, the companies merged into a
dual listed company, in which management
was consolidated into a single entity and share holder interests
were aligned and equivalent, although maintained as shares in
separately named entities. The merger also precipitated a name
change; after two years as
RTZ-CRA, RTZ became
Rio Tinto plc and CRA became
Rio Tinto
Limited, referred to collectively as
Rio Tinto
Group or simply
Rio Tinto.
Mergers and acquisitions following Consolidated Zinc
Major acquisitions following the Consolidated Zinc merger included
U.S. Borax, a major
producer of borax, bought in 1968, Kennecott Utah Copper and BP
Australia's coal assets which were bought from British Petroleum in 1989 and a 70.7%
interest in the New South
Wales
operations of Coal & Allied Industries
also in 1989. In 1993, the Company acquired
Nerco and also the United States coal mining
businesses of
Cordero Mining
Company.
The wordmark of Alcan after its purchase by Rio Tinto.
The 2007 acquisition made Rio Tinto the largest aluminium
producer in the world.
In 2000, Rio Tinto acquired
Northern
Limited, an Australian company with
iron
ore and
uranium mines, for $2.8 billion.
The takeover was partially motivated as a response to Northern
Limited's 1999 bid to have Rio Tinto's Pilbara railway network
declared
open access.
The
Australian
Competition and Consumer Commission regulatory body approved
the acquisition in August 2000, and the purchase was completed in
October of the same year. That year Rio Tinto also bought
North
Ltd and
Ashton Mining for 4 billion USD, adding
additional resources in aluminium, iron ore, diamonds, and coal. In
2001 it bought (under Coal and Allied Industries) the Australian
coal businesses of the
Peabody Energy Corporation.
On November 14, 2007, Rio Tinto completed its largest acquisition
to date, purchasing Canadian aluminium company
Alcan for $38.1 billion.
Alcan's chief
executive, Dick Evans, leads the new division, which has been
renamed Rio Tinto Alcan and its
headquarters situated in Montreal
.
M&A activity in 2008 and 2009 has been focused on divestments
of assets to raise cash and refocus on core business opportunities.
The company sold three major assets in 2008, raising approximately
$3 billion in cash. In the first quarter of 2009 Rio Tinto has
reached agreements to sell its interests in the
Corumba iron ore mine and the
Jacobs Ranch coal mine, and completed
sales of an aluminium smelter in China and the company's
potash operations, for an additional estimated $2.5
billion.
Arrests in China, 2009
On July 5, 2009, four
Rio Tinto employees,
including one Australian citizen, were arrested in Shanghai for
corruption and espionage. One of the arrested, Australian citizen
Stern Hu was suspected of stealing Chinese
state secrets for foreign countries and was detained on criminal
charges," according to a spokesman for the Chinese foreign
ministry. Stern Hu has also been accused of bribery by Chinese
steel mill executives for sensitive information during the iron ore
contract negotiations.
Corporate Status
Organization
Rio Tinto is primarily organized into six operational businesses,
divided by product type:
These operating groups are supported by separate divisions
providing exploration and technology services.
Subsidiaries
Rio Tinto Group has a complex structure of partly and wholly owned
subsidiaries, each held within one of the six operational groups
described above. Major subsidiaries include:
Stock structure and ownership
Rio Tinto Group is structured as a
dual-listed company, with listings on
both the
London Stock Exchange
(symbol: RIO) in London under the name
Rio Tinto
Plc. and the
Australian Securities
Exchange (symbol: RIO) in Sydney under the name
Rio
Tinto Limited The dual-listed company structure grants
shareholders of the two companies the same proportional economic
interests and ownership rights in the consolidated Rio Tinto Group,
in such a way as to be equivalent to all shareholders of the two
companies actually being shareholders in a single, unified entity.
This structure was implemented in order to avoid adverse tax
consequences and regulatory burdens. In order to eliminate
currency exchange issues, the company's
accounts are kept, and
dividends paid, in
United States dollars.
Rio Tinto is one of the largest companies listed on either
exchange. As such, it is included in the widely-quoted indices for
each market: the
FTSE 100 Index of
the London Stock Exchange, and the
S&P/ASX 200 index of the Australian
Securities Exchange.
LSE-listed shares in Rio Tinto plc can also
be traded indirectly on the New York Stock Exchange
via an American Depositary
Receipt. As of March 4, 2009, Rio Tinto was the
fourth-largest publicly listed mining company in the world, with a
market capitalization of
approximately $34 billion. As of mid-February 2009, shareholders
were geographically distributed 42% in the United Kingdom, 18% in
North America, 16% in Australia, 14% in Asia, and 10% in
continental Europe.
BHP Billiton bid
On November 8, 2007, rival mining company
BHP Billiton announced it was seeking to
purchase Rio Tinto Group in an all share deal. This offer was
rejected by the board of Rio Tinto as "significantly
undervalu[ing]" the company. Another attempt by BHP Billiton for a
hostile takeover, valuing Rio Tinto
at $147 billion, was rejected on the same grounds. Meanwhile, the
Chinese Government-owned resources group
Chinalco and the US
aluminum producer Alcoa purchased 12% of Rio Tinto's London-listed
shares in a move that would block or severely complicate BHP
Billiton's plans to buy the company. BHP Billiton's bid was
withdrawn on November 25, 2008, with the BHP citing market
instability from the
global financial
crisis of 2008–2009.
Chinalco investment
On February 1, 2009, Rio Tinto management announced that they were
in talks to receive a substantial equity infusion from
Chinalco, a major Chinese state-controlled mining
enterprise, in exchange for ownership interest in certain assets
and bonds. Chinalco is already a major shareholder, having bought
up 9% of the company's ownership in a surprise move in early 2008.
The proposed investment structure reportedly involves $12.3 billion
for the purchase of ownership interests of Rio Tinto assets in its
iron ore, copper, and aluminium operations, plus $7.2 billion for
convertible bonds. The transaction
would bring Chinalco's ownership of the company to approximately
18.5%. The deal is still pending approval from regulators in the
United States, China, and Australia, and has not yet been approved
by shareholders, although regulatory has been received from Germany
and the
Australian
Competition and Consumer Commission. The largest barrier to
completing the investment may come from Rio Tinto's shareholders:
support for the deal by shareholders was never overwhelming and has
reportedly declined recently as other financing options (such as a
more traditional bond issuance) are beginning to appear more
realistic as a viable alternative funding source. A shareholder
vote on the proposed deal is expected in the third quarter of
2009.
Rio Tinto is believed to have pursued this combined asset and
convertible bond sale to raise cash to satisfy its debt
obligations, which require payments of $9.0 billion in October 2009
and $10.5 billion by the end of 2010. The company has also noted
China's increasing appetite for commodities, and the potential for
increased opportunities to exploit these market trends, as a key
factor in recommending the transaction to its shareholders.
Management
Under the company's dual-listed company structure, management
powers of the Rio Tinto Group are consolidated in a single senior
management group led by a
board of
directors and executive committee. The board of directors has
both executive and non-executive members, while the executive
committee is composed of the heads of major operational
groups.
- Board of Directors
- Executive Directors
- Non-Executive Directors
Operations
Rio Tinto's main business is the production of raw materials
including copper, iron ore, coal, bauxite, diamonds, uranium, and
industrial minerals including titanium dioxide, talc, salt, gypsum,
and borates. Rio Tinto also performs processing on some of these
materials, with plants dedicated to processing bauxite into
alumina and
aluminium, and smelting iron ore into
iron. The company also produces other metals and
minerals as
byproducts from the processing
of its main resources, including
gold,
silver,
molybdenum,
sulfuric acid,
nickel,
potash,
lead, and
zinc. Rio Tinto controls
gross assets of $81 billion in value across the globe, with main
concentrations in Australia (35%), Canada (34%), Europe (13%), and
the United States (11%), and smaller holdings in Africa (3%), South
America (3%), and Indonesia (1%).
Summary of 2008 Production
| Product |
Amount |
World Ranking |
| Iron ore |
153,400 thousand tonnes |
2nd |
| Bauxite |
34,987 thousand tonnes |
1st |
| Alumina |
9,009 thousand tonnes |
1st |
| Aluminium |
4,062 thousand tonnes |
1st |
| Copper (mined) |
698.5 thousand tonnes |
4th |
| Copper (refined) |
321.6 thousand tonnes |
N/A |
| Molybdenum |
10.6 thousand tonnes |
3rd |
| Gold |
0.013 thousand tonnes (460,000 ounces) |
7th |
| Diamonds |
0.004 thousand tonnes (20,816,000 carats) |
3rd |
| Coal |
160,300 thousand tonnes |
N/A |
| Uranium |
6.441 thousand tonnes (14,200,000 pounds) |
3rd |
| Titanium Dioxide |
1,524 thousand tonnes |
N/A, but at least 3rd |
| Borates |
610 thousand tonnes |
1st |
|
Copper and byproducts: Rio Tinto Copper
Copper was one of Rio Tinto Group's main products from its earliest
days operating at the Rio Tinto complex of mines in Spain. Since
that time, the company has divested itself from its original
Spanish mines, and grown its copper mining capacity through
acquisitions of major copper resources around the world.
The
copper group's main active mining interests are Minera Escondida
in Chile, the Grasberg Mine
on Papua New Guinea, Kennecott Utah Copper in the United
States, Northparkes in Australia, and
Palabora in South Africa. Most of
these mines are joint ventures with other major mining companies,
with Rio Tinto's ownership ranging from 30% to 80%; only Kennecott
is wholly owned. Operations typically include the mining of ore
through to production of 99.99% purified copper, including
extraction of economically valuable byproducts. Together, Rio
Tinto's share of copper production at its mines totaled nearly
700,000
tonnes, making the company the
fourth-largest copper producer in the world.
Rio Tinto
Copper continues to seek new opportunities for expansion, with
major exploration activities at the Resolution Copper project in the United
States, La Granja Mine in Peru, and
Oyuu
Tolgoi
in Mongolia. In addition, the company is
seeking to become a major producer of
nickel,
with exploration projects currently underway in the United States
and Indonesia.
Although not the primary focus of Rio Tinto Copper's operations,
several economically valuable
byproducts
are produced during the refining of copper ore into purified
copper. Gold, silver, molybdenum, and sulfuric acid are all removed
from copper ore during processing. Due to the scale of Rio Tinto's
copper mining and processing facilities, the company is also a
leading producer of these materials, which drive substantial
revenues to the company.
Sales of copper generated 8% of the company's 2008 revenues, and
copper and byproduct operations accounted for 16% of underlying
earnings.
Aluminium and related products: Rio Tinto Alcan
The Rio Tinto Group has consolidated its aluminium-related
businesses in its Rio Tinto Alcan division. Rio Tinto Alcan was
formed in late 2007, when Rio Tinto purchased the Canadian company
Alcan for $38.1 billion. Combined with Rio Tinto's existing
aluminium-related assets, the new Rio Tinto Alcan vaulted to the
world number one producer of bauxite, alumina, and aluminium. Rio
Tinto Alcan kept key leadership from Alcan, and the company's
headquarters remain in Montreal.
Rio Tinto Alcan divides its operations into three main business
units. The Bauxite and Alumina unit mines raw bauxite from
locations in Australia, Brazil, and west Africa. The unit then
refines the bauxite into
alumina at
refineries located in Australia, Brazil, Canada, and France. The
Primary Metal business unit's operations consist of
smelting aluminium from alumina, with
smelters located in 11 countries around the world. The Primary
Metal group also operates several power plants in order to support
the energy-intensive smelting process. Finally, the Engineered
Products unit processes aluminium into derivative products for
specialty uses ranging from
beverage
containers to
aerospace
applications.
Rio Tinto Alcan has interests in seven bauxite mines and deposits,
six alumina refineries and six specialty alumina plants, 26
aluminium smelters, 13
power plants, and
120 facilities for the manufacture of specialty products. The
acquisition of Alcan operations in 2007 substantially increased Rio
Tinto's asset base, revenues and profits: in 2008, 41% of company
revenues and 10% of underlying earnings were attributable to Rio
Tinto Alcan.
Coal and uranium: Rio Tinto Energy
Rio Tinto Energy is a business group of Rio Tinto dedicated to the
mining and sale of
coal and
uranium.
The company focuses on both fuel coal for electricity generation in
coal power plants, and
coking coal for use in iron and
steel mills. The company's coal operations are
located in Australia and the United States, mainly operating under
its subsidiaries such as
Rio
Tinto Coal Australia and
Rio Tinto Energy America. In 2009,
Rio Tinto was engaged in an ongoing attempt to sell off assets of
Rio Tinto Energy America. In March 2009, the company agreed to sell
a major asset, the
Jacobs Ranch coal
mine in Wyoming, to
Arch Coal for $761
million, and is continuing to seek buyers for remaining assets in
an effort to reduce corporate debt.
Rio
Tinto's uranium operations are located at two mines: the Ranger
Uranium Mine
of Energy
Resources of Australia and the Rössing
Uranium Mine
in Namibia. The company is the third-largest
producer of uranium in the world. According to Rio Tinto's website,
the company institutes strict controls and contractual limitations
on uranium exports, limiting uses to peaceful, non-explosive uses
only. Such controls are intended to limit use of the company's
uranium production to use as fuel for
nuclear power plants only, and not for
use in the production of
nuclear
weapons. Rio Tinto Energy was responsible for 12% of revenues
and 18% of underlying earnings in 2008.
Diamonds: Rio Tinto Diamonds
The Diavik diamond mine in the
Northwest Territories of Canada
Rio Tinto
Diamonds operates three diamond mines: the Argyle Diamond
Mine
in Western Australia (100% ownership), the Diavik
Diamond Mine
in the Northwest Territories of Canada (60%
ownership), and the Murowa Diamond
Mine located in Zimbabwe (78% ownership). Together,
these three mines produce 20% of the world's annual production of
rough diamonds, making Rio Tinto the world's third-largest producer
of mined diamonds.
The diamond business unit's most advanced exploration project is
the
Bunder Project in Madhya Pradesh,
India, where Rio Tinto became the first foreign group to be granted
a prospecting license there. Rio Tinto Diamonds generated 1% of
revenues and earnings for Rio Tinto Group in 2008.
Industrial minerals: Rio Tinto Minerals
Rio Tinto Minerals is a diverse business group with mining and
processing interest in
borates,
talc,
salt, and
gypsum.
Rio Tinto
Borax, with main operations in California and another mine in
Argentina, supplies nearly half of the world's annual demand for
refined borates, while the company's
Luzenac Group subsidiary supplies 25% of
global talc consumption. The Luzenac Group is also the only arm of
the company with continuing active mining operations on the
European continent: in addition to mines in North America and
Australia, the company also operates a talc mine in southern
France. The Minerals group is also majority owner of
Dampier Salt, which produces over 9 million
tonnes of salt and 1.5 million tonnes of gypsum annually from its
three facilities in northwest Australia. Rio Tinto Minerals
accounted for 6% of company revenues, and contributed 3% to
earnings in 2008.
Iron products and titanium: Rio Tinto Iron and Titanium
Pilbara Iron maintains the Pilbara
Rail Company to serve its Western Australia iron ore mines.
Rio Tinto Iron and Titanium (RTIT) groups together the company's
iron and titanium production. Rio Tinto is the world's
second-largest supplier of
iron ore,
producing over 153 million tonnes in calendar year 2008. The
company's major iron ore mines and development projects are located
in Australia, South America, Canada, India, and Guinea. Major
subsidiaries held within RTIT include
Hamersley Iron, majority interest in the
Pilbara Iron mines, and the
Iron Ore Company of Canada. The
company also has smelting facilities for the production of iron and
steel, limited in size in comparison to the massive amount of iron
ore produced, at
QIT-Fer et Titane
in Canada and
HISmelt in Australia.
Titanium dioxide is mined at three locations in Canada, South
Africa, and Madagascar, and refined at QIT-Fer et Titane's Canadian
facilities. Major subsidiaries include
Richards Bay Minerals of South Africa
and
QIT Madagascar Minerals.
In 2008, Rio Tinto produced 1.524 million tonnes of titanium
dioxide, or approximately 27% of the estimated global production of
5.6 million tonnes.
Rio Tinto Iron and Titanium generated a large portion of the
company's revenues and earnings in 2008, accounting for 27% and
52%, respectively, of company-wide operating results.
Financial results
Rio Tinto Group's revenues and earnings have grown substantially in
the 2003 – 2008 time period, with the largest increase attributable
to the company's 2007 acquisition of Alcan. Although operating
margin is significantly impacted by the market prices of the
various commodities it produces, Rio Tinto has remained profitable
over its recent history and consistently generated positive cash
flows from operations.
Earnings data (in US$ millions)
|
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
| Gross Sales Revenue |
9,228 |
14,530 |
20,742 |
25,440 |
33,518 |
58,065 |
| Underlying Profit Before Tax |
1,968 |
3,017 |
7,094 |
9,719 |
9,947 |
15,977 |
| Underlying Net Earnings |
1,382 |
2,272 |
4,955 |
7,338 |
7,443 |
10,303 |
| Cash Flow From Operations |
3,486 |
4,452 |
8,257 |
10,923 |
12,569 |
20,668 |
| Operating Margin |
19% |
24% |
37% |
42% |
34% |
32% |
The company's previously conservative balance sheet has been
adversely impacted by large amount of debt taken on to finance the
Alcan acquisition. The upcoming maturities of $9 billion in 2009
and $10.5 billion by the end of 2010 have driven the company to
seek to raise cash through a combination of asset sales and equity
infusions. Since the beginning of 2008, the company has completed
or agreed upon $5.5 billion in asset sales, and is seeking a
combined asset sale / equity infusion deal with Chinalco to raise
an additional $19.5 billion.
Summary balance sheet data (in US$ millions)
| !2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
| Fixed Assets |
19,418 |
20,131 |
20,848 |
25,803 |
75,888 |
67,651 |
| Other Assets Less Liabilities |
1,804 |
2,356 |
2,587 |
3,026 |
11,609 |
8,469 |
| Net Debt |
5,646 |
3,809 |
1,313 |
2,437 |
45,191 |
38,672 |
| Other Liabilities and Outside Shareholder's Interest |
5,539 |
6,801 |
7,174 |
8,160 |
17,534 |
16,810 |
| Shareholder's Equity |
10,037 |
11,877 |
14,948 |
18,232 |
24,772 |
20,638 |
Total shareholder returns
on an investment in Rio Tinto's stock have outperformed the
industry-benchmark
HSBC Global Mining Index by
2.0% per annum since 1990. Annual dividends have increased from
$0.60 per share in 2002 to $1.36 per share in 2008. Annual
dividends have been equal to or greater than the preceding year's
dividends in each year since 1975.
Public impact
Involvement with Axis powers in World War II
Rio Tinto's status as a mainly British-owned company, located in
Spain and producing pyrites – an important material for military
applications – created a complicated set of circumstances for the
company's operation in the 1930s and 1940s. During the
Spanish Civil War, the region in which Rio
Tinto's mines were located came under the control of
Franco's nationalists in 1936. Business
generally preferred the nationalists' economic policies to those of
their left-leaning republican adversaries, as was famously noted in
Geddes' approving comment to Rio Tinto shareholders that "miners
found guilty of troublemaking are court-martialed and shot" .
However, Franco increasingly intervened in the company's
operations, at times requisitioning pyrite supplies for use by
Spain and its
Axis allies Germany and
Italy, forcing price controls on the company's production,
restricting exports, and threatening nationalization of the mines.
Although company management (and indirectly, the British
government) managed to counteract some of these efforts by Franco,
much of the mine's pyrite production was channeled to Axis powers
before and during
World War II.
Nonetheless, Franco's meddling caused the mine's production and
profitability to fall precipitously during and after the war,
leading the company to ultimately exit from its Spanish operations
in 1954.
Criticisms
Environment
Rio Tinto Group, like many other companies in extractive
industries, has been widely targeted by environmentalist groups for
its mining activities. Opposition to the company focuses on its
mining methods due to environmental degradation, the company's coal
operations for their contribution to
global warming, and uranium operations for
environmental and nuclear technology concerns.
Rio Tinto's Grasberg mine in Indonesia
has been the focus of environmental concerns.
(Photo by Alfindra Primaldhi)
Perhaps the most significant environmental criticism to date has
come from the
Government of
Norway, which divested itself from Rio Tinto shares and banned
further investment due to environmental concerns.
Claims of severe
environmental damages related to Rio Tinto's engagement in the
Grasberg
mine in Indonesia led The Government Pension
Fund of Norway to exclude Rio Tinto from its investment
portfolio. The fund, which is said to be the world's
second-largest pension fund, sold shares in the company valued at
(US$ 855 million) to avoid contributing to environmental damages
caused by the company.
Rio Tinto disputes the claims of environmental damage at the
Grasberg mine, and states that the company has long maintained an
excellent record on environmental issues.
Labour and human rights
Safety and labour rights concerns have been raised against Rio
Tinto by unions and political action groups, in particular the
Construction,
Forestry, Mining and Energy Union (CFMEU). The CFMEU ran a
campaign against the company after it tried to de-unionise its
workforce after the introduction of the
Howard Government's
Workplace Relations Act 1996.
Activist groups have also expressed concern regarding Rio Tinto's
operations in Papua New Guinea, which they allege were one catalyst
of the
Bougainville
separatist crisis. The British anti-poverty charity
War on Want has also criticised Rio Tinto for
its complicity in the serious human rights violations which have
been occurred near the mines it operates in Indonesia, West Papua
and Papua New Guinea.
Rio Tinto is not, however, universally condemned for its ethical
behavior. The company has won an award for ethical behavior, the
Worldaware Award for Sustainable Development in 1993. The award,
although given by an independent committee, is sponsored by another
multinational corporation (in this case, the sponsor was
Tate and Lyle). Rio Tinto has, in turn,
sponsored its own WorldAware award, the Rio Tinto Award for
Long-term Commitment. The British charity Worldaware ceased to
exist in March 2005.
References
- Rio Tinto iron ore sales team arrested in China
Sydney Morning Herald – Business Day
- Rio Tinto: 4 arrested in China on corruption
charges – AGI
- Australia tries to limit damage over detention of
Rio Tinto staff in China – Telegraph UK
- Hu accused of bribery during negotiation – Yahoo!7
News
- http://www.worldaware.org.uk/about/index.html
External links
Wikis
Quiz
Map
Search
