Rio Tinto’s growth in trouble, says BHP Billiton

LONDON – BHP Billiton, which is bidding US$142 billion (NS1,1 trillion) for Rio Tinto in the world’s largest mining takeover, said this week that its target might have to lower growth forecasts because of delays to projects.

Development of the Coega aluminium smelter has been deferred by power capacity constraints in South Africa. Earlier this month Rio Tinto said the president of Guinea had written to the firm “purporting to rescind” a mining concession for its US$6 billion Simandou iron ore project.The London-based company is still negotiating with Mongolia on the share of profits from the Oyu Tolgoi copper and gold mine.Those projects had been “substantially delayed or may disappear completely”, BHP Billiton’s chief commercial officer, Alberto Calderon, said.”They have spoken about their strong growth in the near term, but I think they may need to revise those forecasts at some stage.”Rio Tinto says shareholders stand to benefit the most from its expansion plans as an independent company.It forecasts a compound annual growth rate for production volume of 8,6 per cent until 2015.In February chief executive Tom Albanese rejected a new bid of 3,4 BHP Billiton shares for each Rio Tinto share as too low.The diversity of projects in its portfolio meant Rio Tinto could still achieve its forecasts, Albanese said during a presentation in London this week.About 70 per cent of its forecast growth to 2015 would come from so-called brownfield expansions, or the enlargement of existing operations.”We remain comfortable with that number,” he said.Some projects “have moved back, some have moved forward.We see no meaningful difference up or down from where we sit today.”Buying Rio Tinto would enable Melbourne-based BHP Billiton to vie with Brazil’s Vale as the world’s biggest iron ore company and become the top producer of copper, aluminium and power station coal.Business ReportEarlier this month Rio Tinto said the president of Guinea had written to the firm “purporting to rescind” a mining concession for its US$6 billion Simandou iron ore project.The London-based company is still negotiating with Mongolia on the share of profits from the Oyu Tolgoi copper and gold mine.Those projects had been “substantially delayed or may disappear completely”, BHP Billiton’s chief commercial officer, Alberto Calderon, said.”They have spoken about their strong growth in the near term, but I think they may need to revise those forecasts at some stage.”Rio Tinto says shareholders stand to benefit the most from its expansion plans as an independent company.It forecasts a compound annual growth rate for production volume of 8,6 per cent until 2015.In February chief executive Tom Albanese rejected a new bid of 3,4 BHP Billiton shares for each Rio Tinto share as too low.The diversity of projects in its portfolio meant Rio Tinto could still achieve its forecasts, Albanese said during a presentation in London this week.About 70 per cent of its forecast growth to 2015 would come from so-called brownfield expansions, or the enlargement of existing operations.”We remain comfortable with that number,” he said.Some projects “have moved back, some have moved forward.We see no meaningful difference up or down from where we sit today.”Buying Rio Tinto would enable Melbourne-based BHP Billiton to vie with Brazil’s Vale as the world’s biggest iron ore company and become the top producer of copper, aluminium and power station coal.Business Report

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