MAC: Mines and Communities

A mess of potash?

Published by MAC on 2008-07-28

Aggressive potash and uranium targets for Rio Tinto

Mega miner Rio Tinto is looking to capture 10% of the world potash market and double uranium production according to the head of the company's energy and minerals unit


25th July 2008

SYDNEY (Reuters)

Rio Tinto Ltd/Plc wants to grab 10 percent of the world potash market as demand for the fertiliser grows in step with biofuel production, Preston Chiaro, chief executive of Rio's energy and minerals unit said on Friday.

The push into a new commodity comes as Rio's board fights a $140 billion all-share takeover by rival BHP Billiton Ltd/Plc which it sees as too cheap and failing to appreciate Rio's growth plans.

Rio's main businesses are in aluminium production and mining iron ore, copper and coal.

Rio only produces a small amount of potash at present from a trial operation but hopes to dig new mines in Argentina and Canada starting in 2012, Chiaro said.

Global demand for potash stood at around 60 million tonnes a year and was growing at around 3 percent a year as more farmland is diverted away from food production to growing crops for energy, creating opportunities for new entrants, he said.

Shrinking world stocks have pushed grain prices to record highs and given farmers the incentive to use more fertilisers, resulting in large price increases for soil nutrients worldwide.

"Potash is critical to producing the world's major crops and benefits from global demand for food and animal feed, plus biofuels," Chiaro said.

Rio was also looking to double uranium production within five years after earlier on Friday announcing plans to sell uranium to China for the first time from its Australian deposits, he said.

Rio mines uranium in Namibia in partnership with the government and owns 68.4 percent of Energy Resources Australia which mines a deposit in northern Australia and already supplies 10 percent of the world's needs.

Growth in uranium, as well as in other products Rio mines, would likely come via expanding existing operations rather than outright acquisitions, which could prove too costly, given record prices for coal, iron ore and other materials, he said.

"Frankly, everything is pretty high-priced right now," he said. Rio has been selling off some of its assets to help recoup $15 billion of the $38 billion it spent buying Alcan of Canada last year.

It recently held discussions over selling its borates division in the United States and some two dozen groups have shown an interest in buying the U.S. energy coals division, according to Chiaro. ($1=A$1.04) (Reporting by James Regan; Editing by James Thornhill)

BHP Billiton boss warns on biofuels

Ruth Williams

The Age

25th July 2008

RISING food prices and the increasing scarcity of vital resources, especially water, will continue to breed social unrest around the world, the head of Melbourne-based mining giant BHP Billiton has warned.

Marius Kloppers also criticised developed countries for contributing to food shortages and making millions of people worse off with the "selfish" use of biofuels.

In the wake of an outbreak of food riots in at least a dozen developing countries this year, and United Nations warnings of food shortages in 37 countries, Mr Kloppers, named by Fortune Magazine as the 18th most powerful business person in the world, has warned of "big social (and) economic impacts" on communities in poor countries as a result of food shortages. "We forget in Australia that about 10% of purchasing power is spent on food and alimentation, that might be 30% in a developing country, it might be 80% in a country like Bangladesh," Mr Kloppers says.

"So if you've got 20% or 30% price inflation per year, you are going to see really big social (and) economic impacts on the population . I think we are going to get more unrest."

Mr Kloppers, 46, reveals his outlook on global issues, including climate change, in stories published in tomorrow's Good Weekend Magazine and The Age's BusinessDay.

He foreshadows communities' access to resources such as water, in particular, will become an "absolutely enormous issue".

The BHP chief executive has also joined the growing list of critics of biofuels. Biofuels, made from crops such as sugar cane, palm and soybean, were once hailed as a solution to carbon emissions from petrol and oil dependency. But, with tracts of farm land turned over to fuel crops, and demand for grains pushing food prices higher, they have since been blamed for contributing to food shortages in developing nations - in turn leading to civil unrest.

"I think biofuels are a selfish way for the West to placate itself and to basically impose the cost on the developing world," Mr Kloppers says. "We are making hundreds of millions of people worse off with biofuels, because it's pushing up food prices."

BHP has substantial interests in petroleum and uranium, making it a logical opponent of biofuels. But with mining interests in at least 20 developing countries - mostly in Asia, Africa and South America - it also has reason to be concerned about the economic and social stability of these countries.

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