London Calling asks: "Will it all come out in the Walsh?"
Published by MAC on 2015-01-15Source: Bloomberg, Sydney Morning Herald
Rio Tinto CEO's blithe hopes for an Indian Summer
It's no surprise that Rio Tinto's CEO has been “wooing” India’s new prime minister, Narendra Modi.
Ironically, his predecessor Tom Albanese – now with Vedanta Resources – has been doing much the same over the past year.
Modi's pledge to boost inward investment in minerals, no matter what the existing rules, is perhaps a little discomfiting for a company that's long worn its “CSR responsibilities” on a sleeve .
Nonetheless, Rio Tinto has never been one to pick a fight with government, even when that government is manifestly ditching a large part of its own legislation: a key example being India's Forest Peoples rights legislation of 2006.
Now, according to Bloomberg, Rio Tinto's chief executive Sam Walsh (appointed in February 2013, just over a year before Modi became Indian prime minister) has “pressed” his Indian counterpart to open up the country to an extent not witnessed before.
That's not to suggest that the world's second most populous state has so far been off-limits to the world's second most powerful mining outfit. Far from it. Rio Tinto has run a diamond cutting and retail enterprise for some years out of Gujerat, Modi's home state, sourcing gemstones from its Argyle mine in Australia and another in Canada.
Little wonder then, that Walsh is very keen to bring the Madhya Pradesh Bunder diamond mine online as quickly as possible, thus considerably shortening the supply chain and boosting its own revenues.
He's also anxious to remind the Indian prime minster of an earlier agreement under which Rio Tinto could exploit the Keonjhar and Sundergarh iron ore deposits in Odisha (Orissa), in joint venture with the state-owned Orissa Mining Corporation.
The Memorandum of Understanding (MOU) for these mines was signed as long ago as 1995. But, after carrying out initial prospecting and sampling, Rio Tinto effectively withdrew in the late 2000's. Whether it was pushed or chose to leave of its own accord is open to some conjecture.
The diamond and iron ore projects are likely to proceed, despite local opposition, and the prospect that they won't be half as profitable as Walsh would liket.
Indeed, the Orissa venture may well not be as rich in minerals as initially thought. The distinctly wilting price of iron ore is likely to persist for some years. And, we might remind ourselves, it's that Rio Tinto, BHP Billiton and Vale have provoked by recently flooding the market with high-grade ore., relatively cheap to new and transport.
Uranium and coal
But this isn't all that Walsh has been angling to extract from India lands, having also dangled the carrots of uranium exports and investment in domestic coal mining, in Modi's face.
Late last year, the Australian governmen signed an agreement with India, making it virtually inevitable that Rio Tinto and BHP Billiton will be supplying the nuclear fuel.
On 13 January 2015, Walsh announced that Rio Tinto expected uranium to be delivered to India within the next two years “as soon as safeguards are in place to restrict its use to power generation”.
Since India has consistently refused to sign the Nuclear Non-Proliferation Treaty - and is even less likely to do so under its present regime - such optimism must be accounted naïve, to say the least.
It's also doubtful that Rio Tinto will be in a position to honour any supply commitment, since it's been markedly cutting back its operations at the Ranger mine in northern Australia, as reported by the Sydney Morning Herald on January 13th 2015.
And what does it mean in practice for the company to be involved in promoting India's struggling coal sector?
These coal "assets" are surely among the most “stranded” of minerals to be found anywhere. India's own reserves are poor in quality and high in riddled with ash and other contaminants - a key reason why government and industry are now heavily relying upon higher-quality imports.
We might therefor well ask :“On which planet does Sam Walsh currently reside?” It's certainly not one the majority of Indian citizens would choose to live.
Especially the hundreds of thousands of poverty-stricken villagers, slowing dying from respiratory disease in the coal fields.
[London Calling is published by Nostromo Resarch. Opinions expressed in this column do not necessarily reflect those of any other person or party. Reproduction is welcomed under a Creative Commons licence.]
Rio Tinto woos Modi to revive India's diamond past
Talks have also focused on the prospects of uranium exports to India and on coal mining opportunities, Walsh said.
Bloomberg
12 January 2015
Rio Tinto Group’s Chief Executive Officer Sam Walsh has pressed India’s Prime Minister Narendra Modi for approvals to develop the nation’s first diamond discovery in 40 years and set up a $2 billion iron-ore project.
Walsh has spoken with Modi three times in the past six months on the planned $500 million Bunder diamond mine and the Odisha iron ore project in eastern India, he told reporters today in New Delhi. Talks have also focused on the prospects of uranium exports to India and on coal mining opportunities, Walsh said.
“We’re waiting for approvals, forestry and environment approvals, which I am hopeful will come through in the near term,” Walsh said, referring to the Bunder project. A swelling middle class in emerging economies including China and India will be key to demand for diamonds, according to De Beers, the biggest producer. By 2025, combined sales in the two nations may match the diamond jewelry market in the U.S., the world’s largest, WWW International Diamond Consultants Ltd. said in October.
The Bunder project in Madhya Pradesh, about 500 kilometers (310 miles) southeast of New Delhi, would restore India as a major producer of diamonds. The project may be one of only four new mines to enter production in the next decade, according to Rio Tinto. Two calls to Jagdish Thakkar, a spokesman at the prime minister’s office, went unanswered.
Koh-i-Noor
India, which previously yielded gems including the Koh-i- Noor diamond now prized among Britain’s crown jewels, currently has one small mine in production. Bunder’s annual production rate would be about 20 times higher, Rio said in a filing.
“It would be fantastic,” Vipul Shah, Mumbai-based chairman of the Gem & Jewellery Export Promotion Council, said by phone. “There’s a good future ahead for India’s jewelry industry.”
Walsh discussed both the Bunder and Odisha projects with Modi in Melbourne in November and in New Delhi in September. London-based Rio holds 51 percent of the Odisha iron ore venture, which is forecast to yield as much as 20 million tons a year when it starts.
India’s retail diamond jewelry market is worth about $10 billion and forecast to expand at 15 percent a year through 2019, according to Rio Tinto. In China, Chow Tai Fook Jewellery Group Ltd., the world’s largest listed jeweler, is seeking to add about 300 precious gem stores by 2019 as rising incomes fuel demand for luxuries.
The Bunder deposit was discovered in 2004. Rio Tinto, which already uses about 300,000 workers in India to cut and polish diamonds from its Argyle mine in Australia, is seeking approvals to bring Bunder into production as early as in 2019.
“Strategically, it probably makes a lot of sense,” Tim Schroeders, a portfolio manager who helps oversee $1 billion in equities at Pengana Capital Ltd., said by phone from Melbourne. “Whether they make a lot of money out of it, I’m not sure.”
Rio’s diamonds and minerals unit, which also includes mineral sands and titanium assets, accounted for 5 percent of earnings in 2013, according to data compiled by Bloomberg.
In November, Rio Tinto approved a $350 million project to expand a diamond mine in northwestern Canada. The producer scrapped a planned sale of its diamonds unit in June 2013 after failing to find a buyer.
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Australia to export uranium to India by 2017 – Rio Tinto
Rio Tinto expects to start exporting Australian uranium to India in the next two years.
Reuters
13 January 2015
Rio Tinto Ltd expects to start exporting Australian uranium to India in the next two years, its chief executive said, as soon as safeguards are in place to restrict its use to power generation.
“Once all those steps are in place, clearly there is an opportunity for us and Australia here,” Sam Walsh said on the sidelines of an energy conference on Monday.
India has nuclear weapons and, like its neighbour Pakistan, has not signed the Nuclear Non-Proliferation Treaty (NPT). Australia has never before sold uranium to a non-signatory of the NPT.
Indian Prime Minister Narendra Modi, who took office in May, aims to raise the share of nuclear power in electricity generation from just 3 percent, as part of a strategy to curb chronic power shortages and cut reliance on oil imports.
Modi and his Australian counterpart Tony Abbott sealed a deal in September for Australia to sell India uranium, in a show of international acceptance toward India’s nuclear programme.
India has nuclear energy agreements with 11 countries and imports uranium from France, Russia and Kazakhstan.
Rio Tinto is one of the world’s top uranium producers.