• Rio faced the first of two grillings from shareholders at its London AGM last week with is Aussie meeting to come on May 5
  • Rio board has approved plans to work with Guinean Government and Chinese partners on Simandou iron ore development
  • CEO Jakob Stausholm says Rio is focused on diversification and growth despite showering shareholders with dividends amid iron ore windfall

Rio Tinto (ASX:RIO) has begun its drawn out AGM season with the first opportunity for investors to quiz its board taking place in London on Friday.

Its board, in the presence of incoming chairman Dominic Barton, faced a series of thorny questions around its ESG credentials, ranging from its issues getting approval for the Jadar lithium mine in Serbia, water quality at its mineral sands operations in Madagascar and approvals at the Resolution copper project in the USA to its hefty scope 3 carbon emissions and the Juukan Gorge debacle.

There were a couple of big points for investors coming out of the grilling that will no doubt rear its head again when the Rio board converges on Melbourne on May 5 for the Australia edition.

Rio it should be noted is sitting on a dreaded second strike after a big vote against its remuneration report last year.

CEO Jakob Stausholm appears to have addressed many of the ESG issues that prompted last year’s vote of no confidence from investors, but we won’t know the outcome of this year’s ballots until after the Australian AGM next month.

When it comes to the company’s operations, two near term catalysts are the attempt to buy out the minority shareholders of its Oyu Tolgoi copper-gold mine in Mongolia, by consuming the 49% Rio doesn’t own in Canadian listed Turquoise Hill Mining.

Rio wants to pay C$34 a share and Stausholm maintains the US$2.7 billion deal is an attractive proposal for minority stockholders.

Its current trading price of C$37.64 suggest they think otherwise.

 

Diversity and growth

Given Oyu Tolgoi’s immense scale, in excess of 500,000t of copper a year once in full swing, expanding its share of Turquoise Hill from around 34% to 66% would help Rio diversify its earnings away from iron ore, the key driver of its record US$21 billion profit in 2021.

Responding to questions about Rio’s $23.2 billion dividend payout in 2021, Stausholm said the firm was not just focused on making returns to shareholders to keep them happy.

He said the miner was focusing capital investments on replacement capacity in iron ore and diversifying its asset base, in recognition of the cyclical nature of commodities.

“Rio Tinto is of course a very long term company so it’s not that we can switch on and off projects and then it has an impact the next quarter,” Stausholm said.

“What we have seen is a massive build up of a fantastic iron ore business over a couple of decades and a year like last year, we were again surprised about the enormous strengths of the Chinese economy.

“We actually took decisions back in 2018 and 19 and we are finalising four major projects … it’s 90 million tonnes of renewed capacity in the Pilbara all coming on stream as we speak.

“It was supposed to be on stream by the end of the year, it’s going to take a little longer, it’s going to happen here in the first half we have been affected by COVID and other matters.”

Stausholm said Rio was not wasting its windfall profits.

“But I think what you should think about is if you look back in the annual reports ever since 2016, every year we’ve spent a little bit more. We’re not flip flopping. We’re in a very disciplined way ramping up investments and we are offering up a lot of replacement capacity in the Pilbara.

“In the meantime, I should say we are also growing much more in the other product groups so that we get a better diversification of the company.”

One project the company is keen to develop is its share of the Simandou iron ore mine.

After announcing a non-binding development pact with the Guinean government and the deposit’s other, Chinese backed stakeholder, Stausholm said the Rio board had approved the a path forward for the future development of the iron ore mine which will produce “high-grade iron ore essential to
decarbonising the world’s steel industry”.

“The Framework Agreement recently signed with the Government of Guinea and our Chinese joint venture partners sets out co-development of the port and rail infrastructure, which will occur in line with international ESG and compliance standards,” Stausholm said.

“We look forward to working together to develop this nation-transforming project and I am personally committed to ensuring that the people of Guinea benefit from Simandou along with our shareholders and customers.”

 

 

Rio Tinto (ASX:RIO) share price today:

 

 

 

Iron ore dip brings down miners

Iron ore prices fell on Friday as Covid lockdowns in China continued to weigh on commodity demand.

Iron ore swaps fell 3.4% to US$151/t, with BHP (ASX:BHP), Fortescue Metals Group (ASX:FMG) and Rio all in the red.

Gold miners were solid after prices of the precious metal rose over the weekend amid inflation concerns.

Meanwhile IGO (ASX:IGO) and Western Areas (ASX:WSA) were both up big after investors gave the tick of approval to the nickel miner’s increased bid for its rival in the wake of the commodity’s made price run last month.

But the biggest mover today was Zimplats (ASX:ZIM). The African PGE metals producer soared 10.14% after palladium prices rose 8% to US$2431/oz on news the London Bullion Market Association would stop receiving palladium and platinum from Russian refiners.

 

 

Monstars share price today: