The British Columbia Environmental Appeal Board has upheld Rio Tinto’s plans for sulphur dioxide emissions in the Kitimat airshed and dismissed the appeal from residents Emily Toews and Elisabeth Stannus.
The 113 page decision was released by the EAB late on December 23. It contains a series of recommendations for further studies and monitoring of the health of Kitimat residents. In effect, the EAB is asking the province (which is all it can do) to spend money and create a new bureaucracy at a time when Kitimat’s medical community is already short staffed and under stress.
By December 31, 2016…. engage with Ministry executive to secure their support for, and action to encourage, a provincially-led Kitimat region health study, based on the development of a feasibility assessment for such a study.
On December 24, Gaby Poirier, General manager – BC Operations
Rio Tinto, Aluminium Products Group released a statement saying:
Based on the evidence and submissions made by each of the parties, the EAB confirmed our permit amendment.
Although it is welcome news for Rio Tinto that the MOE Director’s decision was upheld, and the rigor and cautious approach of the science were confirmed by the EAB, we also recognize that there is more work to do to address community concerns regarding air quality in the Kitimat Valley.
In providing their confirmation, the EAB included a series of recommendations. Over the coming months, we will be working to fully assess them and we will continue to involve the local community including residents, stakeholders and our employees as we do so, noting that some of the recommendations have already started to be implemented.
I would like to take this opportunity to thank the residents of Kitimat, our valued stakeholders and our employees for their support during this process. At Rio Tinto, we are committed to protecting the health and well-being of our employees, the community, and the environment as we modernize our BC Operations.
Members of Unifor 2301 rallied in front of the Rio Tinto offices at City Centre Mall in Kitimat, Wednesday, October 7, to protest against what they called “precarious work” and health and safety issues at the Rio Tinto BC Operations aluminum smelter.
The rally was part what the union calls a “Rio Tinto Global Day of Action” aimed at Rio Tinto operations in North America, Europe, Africa and Australia. Unifor 2301 is part of the “Rio Tinto Global Union Network,”
Sean O’Driscoll, president of the local, concentrated on what he said was an increasingly tense relationship with Rio Tinto over health and safety issues. O’Driscoll told a group of supporters that relations with the company over health and safety have gone down hill since Rio Tinto took over Alcan. He said the CAW, predecessor to Unifor, had negotiated a strong health and safety agreement with Alcan that Rio Tinto is now trying to weaken down to minimum government imposed standards.
O’Driscoll said that the list of grievances between the union and management are growing and that instead of trying to solve the grievances, RIo Tinto has filed a grievance of its own claiming the union has filed too many grievances.
The main reason for the rally was a worldwide protest over what the union calls “precarious work,” the use of short term, usually poorly trained workers, what most industries call call “casuals” to save money. The other issue at the protest was increasing contracting out.
O’Driscoll also pointed to the controversial issue of increased sulphur dioxide emissions from the upgraded smelter. Unifor has joined environmental groups in a successful court challenge to the BC Environmental Assessment Agency’s approval of the emission plan.
Kitimat Unifor local 2301 has succeeded in forcing the Environmental Assessment Board (EAB) to take responsibility for investigating the impact of plans for a dramatic increase of sulphur dioxide (SO2) at the Rio Tinto smelter in Kitimat. The BC Supreme Court has sided with Unifor in a judicial review involving the Ministry of Environment’s approval of the smelter’s expansion without a SO2 “scrubber”.
The project will increase SO2 emissions from 27 tonnes per day to 42 tonnes per day.
“Expanding the smelter without a scrubber is a terrible health risk to my community,” said Sean O’Driscoll, Unifor Local 2301 President. “We’re very pleased that Rio Tinto’s proposal will have to go through an environmental assessment. It’s a shame that it takes a Supreme Court Judge to force the BC Liberal government to do the right thing.”
The decision to approve the smelter expansion without scrubbers will now be sent back to the EAB.
Airborne sulphur dioxide is a well-known cause of respiratory ailments. Excessive SO2 levels in Kitimat are likely already impacting human health. In July 2012 a Community Health Synopsis study published by Northern Health concluded that the incidence of death from bronchitis, emphysema, and asthma is 60 per cent higher in Kitimat than the British Columbian average. Expert evidence known to the Minister of the Environment reveals that increased SO2 can cause serious health problems, including fatal respiratory failure.
In the decision, BC Supreme Court Justice W.F. Ehrcke wrote that it was unreasonable for the EAB to conclude that Unifor’s appeal must be rejected on the ground that the 2014 Letter of Approval to Rio Tinto was not an appealable decision within the meaning of the Act.
Other challenges to the emissions of sulphur dioxide from the Rio Tinto smelter are continuing.
Gaby Poirier, BC operations manager for the Rio Tinto Aluminum metals group called it a shining moment as the first ingots from the new modernized potlines were wheeled into the also new Henning Hall at the Kitimat smelter on Tuesday, July 7. Referring to the nearly complete Kitimat Modernization Project (KMP), Poirier said, “It’s now like these ingots, our time to shine. Let’s all shine together and become the best aluminum smelter in the world.”
The Kitimat Modernization Project increases aluminum production capacity by 48 per cent. “I have no doubt that KMP will help secure the future for Rio Tinto in British Columbia as a supplier of high quality, low carbon footprint aluminium for the Pacific Rim customer,” Poirier told employee and guests at the First Metal ceremony. (The company held similar ceremonies later in the week for employees unable to attend the first event).
“As we move to ramp to full production sometime in 2016, the transition is still at an early stage. Now more than ever we have to keep the focus to have a safe, sustainable ramp up. When we reach our full capacity of 420,000 tonnes sooner than you think… we’ will have been here 60 years. We’re aiming for another 60 years now.
“It’s more than a ramp up for us; it’s our journey to be the best aluminium smelter in the world. And yes the best, nothing less. Everything starts with a dream. So today we’ve got about 10 pots started, there are still 374 to go. And all this ramp up will be done to a scheduled drum beat, with a safe and sustainable. So today’s a well-deserved celebration for first hot metal and we are now preparing our first metal shipment but there are still significant challenges among us that we’ll go through together. One team one goal. That’s the only way we’ll be successful by working together.”
The modernized smelter, which was delivered in line with the revised schedule and budget, is powered exclusively by Rio Tinto’s wholly owned hydro power facility [at Kemano] and uses the company’s proprietary AP40 smelting technology which will effectively halve the smelter’s overall emissions, Rio Tinto said in a news release.
Michel Charron, KMP Project Director with Rio Tinto’s Technology Group, told reporters that the project did come in at the revised budget of $4.8 billion up from the original estimate of $3.3 billion, discounting reports in some media that the costs had reached as high as $5.5 billion. ‘”They gave me 4.8 and I finished at 4.8,” Charron said.
Charron compared what’s left to do with someone moving into a new house. “There’s a bit of asphalt to be put in, there’s a bit of construction on the last part of the potline…. there’s three months to finish up everything, the little things, the painting, so we’re going to be doing that.”
As of July 7, KMP employed 1024 people, Charron said. As the construction finishes, he said, “The work force will be going down quite rapidly at the end of July and through August and September,”
The newly constructed Henning Hall cafeteria, meeting hall and change facility, named in honour of Paul Henning, now Vice President of Strategic Projects, was packed as Charron, Poirier, Henning, Phil Newsome, KMP Project Director for Bechtel, Sean O’Driscoll, Unifor 2301 president, Mayor Phil Germuth and Haisla Nation Deputy Chief Councillor Taylor Cross brought in the two ingots which were actually poured on June 29.
“As we focus on getting a brand new and somewhat very complex facility up to speed, I urge you to remember that safety remains our top priority, ” Poirier said. “If we get this right the start-up and ramp up will be right too. And this is the only way we can be successful in delivering that world class project. So now in a few words, it is now the time to show what four generations of aluminum producers can do,” Poirier said.
Poirier then turned to Haisla Nation hereditary chief Sammy Robinson. Robinson and his wife Rose unveiled a totem pole commissioned by Rio Tinto for Henning Hall.
The pole tells the story of a time when there were a lot eagles in the Kitimat region. One young man was told “to listen to your elders, listen to your mother, not to laugh at handicapped people, not to laugh at old people for they are good in their own way,” Robinson said. Another thing that this young man was told was never to pick up anything shiny, but he didn’t listen and tried to capture a fur seal that has shiny fur. Unfortunately, for the young man, at that moment a giant eel was swallowing the fur seal and dragging them both down to the bottom of the sea. The eagles, however, got together and lifted the seal and the young man from sea and he safely returned to the beach.
Taylor Cross, Deputy Chief Counsellor for the Haisla, said “It’s a great feeling that big companies like this are doing their best to protect the environment we all live in. Every last one of us enjoys this beautiful country we live in. Myself I’m on my boat almost every weekend, down the Channel. I want to that to continue that for the rest of my life and for my kids’ lives. I want to pass that knowledge on that I’m getting. This project created employment opportunities for us, contracting opportunities for the Haisla Nation and training that we would have never gotten.
“Our unemployment rate when from about 60 to 65 per cent down to may be five or eight per cent. Every Haisla Nation member who wanted to work was working. It was a great achievement, it gave them skills, training, anything they wanted to be. And getting ready for the next project that’s going to come through Kitimat.” Cross warned that with KMP ending, unemployment among the Haisla will be going up again. The legacy agreement signed between Rio Tinto and the Haisla will ensure that members of the First Nation will continue to be trained and be part of running the smelter. A Haisla joint venture runs catering for the cafeteria.
Paul Henning, who had pushed the modernization project for years was greeted by a sustained round of applause. He opened his talk by saying how he told Sean O’Driscoll about the intent to modernize the plant. “He was the kind of guy like Gabby is striving and thriving and pushing and pulling. Nothing was a barrier, nothing was too high to climb to get this project and this guy said ‘hey just cool it these mega projects can take a decade.’ Well boy did we show him. Boy did we show him Boy did we show him, we did in it nine years,” as the guests laughed.
“Of course we have a wonderful platform. The platform not only being Kemano…the Douglas Channel and of course the site that… we have here in BC. The modernized smelter we know well. It is world class we have adopted the best technology we can apply in this location coupled to the lowest cost energy supply to a smelter anywhere in the world with access to global markets particularly the Asian Pacific Rim
“Sounds like a factor of success to me. If you’re going to build it, you build it right here.
“Even though the economic climate was difficult during the journey we’ve been through, I always felt that I had support at every level. We continued to get funding, even if it at sometimes it was smaller than we wanted. We got funding to keep this project alive. We engaged at different levels the creativity in construction… to help us get over that threshold and that hurdle to allow us to be here today. to be able to celebrate this fantastic milestone.
“I truly believe that KMP is a catalyst for megaprojects in the northwest. I am fortunate to be involved in other projects that are looking to come to Kitimat and they’re going to come to Kitimat because of its location but what I think you’ve also demonstrated as a community that they’re coming to Kitimat because of its people, As a host community you’ve demonstrated that you can live alongside and support three and half thousand construction professionals at any given time,
“I’m delighted that we’re through. I’m delighted that the team has got through before the next wave comes.
“I hope that legacy of the learning is two things, It’s enabled the community to be ready and be better prepared for the next one, also for those companies to learn from some of the opportunities and challenges we’ve been through and overcome.
“It was built in Kitimat BC by Canadians… I think at one point I think we had a hundred international workers. So the [labour agreement] allowed the ebb and flow of workers here form a Canadian base. I think that is also a true success factor.”
“For myself each milestone that we go through is a pinch. My goodness we actually pulled this off. We actually pulled this off. So my challenge, you know have the tools. you know have the equipment. You have the people, I was never worried about the people, smelting is in our DNA, three perhaps four generations of smelter experts in Kitimat. Now is your time to show what the best smelter in the world can do.”
Mongolia will hold a reality television style text message referendum on the future of Rio Tinto’s troubled Oyu Tolgoi copper mine project, the Financial Times reports.
The FT says Mongolian prime minister Saikhanbileg Chimed will ask voters whether their country should develop more of its mineral resources or resort to austerity to support the faltering economy.
Mongolian voters will have four days, beginning Saturday, to text their vote on the future of Rio Tinto’s plans for the $6 billion project.
Economists say the copper mine project, which is stalled because Rio Tinto has been unable to reach an agreement with Mongolia over project financing and revenue sharing could generate about a third of the country’s gross domestic product. The lack of an agreement, in concert with current instabilty on financial markets has sent Mongolia’s currency plunging.
Like Kitimat’s plebiscite on the Northern Gateway, the vote will be non-binding. The FT says the vote “could help Mr Saikhanbileg broker a consensus in favour of allowing OT to proceed, cutting through the arguments of critics who say Mongolia is not getting its fair share of the mine’s earnings.”
The FT reports: “The prime minister, who explained the referendum this week on television, was trying to appeal to the general public ‘over the heads of squabbling factions in parliament and break the logjam.'”
The world’s business media are paying rapt attention to Glencore’s now stalled attempt to take over Rio Tinto.
Late Tuesday, the company issued a news release which says
Glencore announces that in July 2014 it made an informal enquiry by telephone call to Rio Tinto, seeking to gauge whether there might be any interest at Rio Tinto in investigating some form of merger between the two companies. Rio Tinto responded that it was not interested in pursuing these discussions.
Glencore confirms that it is no longer actively considering any possible merger transaction with, or offer for the shares of, Rio Tinto.
As a consequence of this announcement, the Panel Executive has determined that Glencore is for a period of 6 months from the date of this announcement subject to Rule 2.8 of the City Code on Takeovers and Mergers in relation to Rio Tinto. Glencore however reserves its rights to make an offer in the future with the consent of the Takeover Panel, either with the recommendation of the Board of Rio Tinto, in the event of a third party offer for Rio Tinto, or in the event of a material change in circumstances.
The board of Rio Tinto notes the recent press speculation regarding a possible combination of Rio Tinto and Glencore.
The Rio Tinto board confirms that no discussions are taking place with Glencore.
In July 2014, Glencore contacted Rio Tinto regarding a potential merger of Rio Tinto and Glencore.
The Rio Tinto board, after consultation with its financial and legal advisers, concluded unanimously that a combination was not in the best interests of Rio Tinto’s shareholders.
The board’s rejection was communicated to Glencore in early August and there has been no further contact between the companies on this matter.
According to Bloomberg, Glencore’s secretive CEO Ivan Glasenberg made a verbal stock offer to Rio Chairman Jan Du Plessis in July. The Rio Tinto board rejected the offer in August, which means under that UK law, Glencore must wait six months before making another bid.
Glasenberg’s informal July bid carried no significant premium, said the person, who asked not to be identified as the information is private.
Bloomberg’s television arm reports that the Glasenberg’s offer was in stock, an attempt, apparently, to get Rio Tinto “on the cheap.” Earlier Forbes reported that there were rumours of an offer from Glencore to Rio Tinto of a “share-swap merger”
Bloomberg goes on to report that.
After being rebuffed by the board, Glencore has reached out to Rio’s biggest investor, Aluminum Corp. of China, to gauge its interest in a potential deal in the next year, according to people familiar with the matter.
After the initial report on the takeover Monday, business writers used epic analogies.
Meanwhile, behind its premium paywall Lex, the Financial Times is comparing the Glencore bid for Rio Tinto to the Game of Thrones.
The analysts are saying there are two main factors, Rio Tinto’s balance sheet has been weakened by a downturn in the iron ore market while at the same time Glencore aims to overtake Rio Tinto rival BHP Billiton. If it acquires RT, then Glencore will become the world’s largest mining and resource company.
The business media all say Glencore is already the world’s biggest trader in commodities.
China is a major force behind this corporate Game of Thrones. China wants more access to world resources for its increasingly hungry industry and population,while at the same time it has apparently all the iron ore it needs and iron ore is Rio Tinto’s biggest asset. The key player is a giant Chinese aluminum company now under investigation as part of the country’s corruption crack down.
Glencore is already huge, listed as Number 10 on the Fortune Global 500 list . Rio Tinto is far down at number 201. (Walmart is number one. Companies involved with Kitimat are Shell in second place, Sinopec in third and the China National Petroleum Corporation in fourth. Chevron is in 12th spot.)
Glencore is a major player in the aluminum business with assets around the world, some in partnership with the Russian giant aluminum group Rusal . According to Wikipedia, Glencore owns 8.8 per cent of a joint venture with Rusal, and the Sual Group (Siberian-Urals Aluminium Company) . That joint venture, Wikipedia says, has created the “World’s largest aluminium and alumina producer with 110,000 employees in 17 countries.”
Glencore along with Rusal has an undisclosed interest in Rusal’s Windalco alumina operation in Jamaica. Glencore also has an undisclosed interest in the Alumina Partners of Jamaica. It owns 44 per cent of Century Aluminum in Monterey California. Glencore has also undisclosed interests in idle aluminum smelters in Washington State and Montana. It has an undisclosed interest in Kubikenborg Aluminium AB in Sweden, Aughinish Alumina in Ireland and Eurallumina in Sardinia.
In the northwest, Glencore, through its agricultural subsidiary Vittera, is a partner, along with Cargill Ltd. and Richardson International in the Prince Rupert Grain Terminal. In Vancouver, Glencore owns Vittera’s Cascadia grain terminal in Vancouver.
located on the south shore of Burrard Inlet. Vittera Inc. owns and operates Canada’s largest grain handling network. The terminal handles wheat, durum, feed barley, malting barley, canola seed and specialty products, with storage capacity of 282,830 tonnes of product, handling loading from its 244 metre berth with a depth of 14.6 metres. –
Glencore is also developing a metallurgical coal mine near Chetwynd.
Glencore, through the earlier 2013 take over the mining company Xstrata owns the famous Kidd copper and zinc mine near Timmins, Ontario. The operation has 1300 employees. (Xstrata earlier took over the well-known Canadian mining company Falconbridge). It also operates the Horne copper Smelter in Rouyn-Noranda, Québec, which employees 700 and the CCR copper Refinery in Montreal, Québec which employees 650.
In Sudbury, Glencore is reviving the Errington-Vermillion Project, two deposits were that were previously mined in the 1920s and 1950s. It says the project has potential for approximately nine million tonnes, polymetallic- zinc, lead,copper, silver, gold or a rate of 2,900 tonnes per day.
The other factor for Kitimat with Glencore is that, unlike Rio Tinto, which is mostly a mining and smelting company, Glencore has interests in natural gas, oil and shipping and it is reported that the company wants to expand its hydrocarbon business from extraction to shipping.
According to Forbes, many Rio Tinto shareholders are not happy about the costs of the takeover of Alcan
The chairman of Rio Tinto, Jan du Plessis said the board was happy with the leadership of managing director, Sam Walsh, and finance director, Chris Lynch.
Interestingly, that might not be a view shared by all Rio Tinto shareholders who are still smarting from the $40 billion written off after the ill-timed acquisition of the Alcan aluminium business, followed by a $3 billion write-off after an equally poorly executed coal asset deal in Africa.
(It should be noted that Walsh was not the CEO at the time of both acquisitions, but was brought in to put Rio Tinto back on track after those huge losses)
The Rio Tinto news release says it’s business as usual:
Rio Tinto remains focused on the successful execution of its strategy, which the board of Rio Tinto is confident will continue to deliver significant and sustainable value for shareholders….
The board believes that the continued successful execution of Rio Tinto’s strategy will allow Rio Tinto to increase free cash flow significantly in the near term and materially increase returns to shareholders. Rio Tinto’s shareholders stand to benefit from the very considerable value that this will generate.
RBC Capital Markets analyst Timothy Huff said: “A potential merger with Rio would enable Glencore to get hold of the lowest-cost iron ore business in Australia. This is likely just a shot across the bow from Glencore and we expect Glencore to play the long game with any highly desired acquisition target. While asset divestments may have to play a larger part in a Glencore/Rio tie-up, we think the broader strategy for an enlarged group makes sense.”
The Globe and Mail Report on Business says
It is an open secret that Mr. Glasenberg, a multibillionaire South African, has every intention of using mergers and takeovers to greatly extend Glencore’s reach along the commodities value chain. Glencore’s strategy is to control the mines, the warehouses, the ports, the ships and the trading networks that produce and distribute commodities.
The question is whether Rio’s management and shareholders would endorse a deal that could come with no takeover premium. Some analysts think not.
One problem with Glencore’s approach to Chinalco is that the company is part of the wider probe by the Chinese government of corruption. As Reuters reported
Aluminum Corp of China general manager Sun Zhaoxue is suspected of “serious violations” of the law, a euphemism for corruption, according to a notice published by China’s Central Commission for Discipline Inspection.
Sun is also the vice chairman of Chinalco’s listed subsidiary, Aluminum Corp Of China Ltd. He is the former president of China National Gold Group Corp, the country’s biggest gold producer.
Some business analysts say even if Rio Tinto shareholders are not happy with current management they may not want their holdings affected by a possibly corrupt Chinese company.
On the other hand, as the Telegraph points out, it is really the Chinese government that will make the decision, not the company itself.
China’s government holds the key to a deal despite Rio Tinto’s public rejection of Glencore’s interest. State-owned Aluminum Corporation of China is the largest shareholder with around 10 per cent and Glencore reportedly started talking to the Chinese in the summer to sound out their interest in an exit. Although China is the world’s largest consumer of iron ore and owning such a significant stake in one of the world’s biggest mining groups is strategic now could be a good time to exit. The world is flooded with iron ore and securing supplies for steel mills is no longer an issue for the Chinese government. Now is a good time to cash in.
The man behind the so-far failed deal, who is likely “patiently stalking” Rio Tinto is the highly secretive and private Ivan Glasenberg.
Pounce, leak and wait.
It is a classic strategy in the shadowy world of mergers and acquisitions and Ivan Glasenberg, the chief executive of Glencore, is a master of this dark art.
Although a potential $160 billion mega takeover of the world’s largest shipper of seaborne iron ore, Rio Tinto, was flatly rejected in August, don’t bet on Glasenberg walking away for good
Glasenberg was born in South Africa in 1957, and apparently now holds four passports, South Africa, Australia, Israel and as of 2011, Switzerland.
When Glencore went public on the London Exchange in 2011, which the Guardian called “the biggest stock exchange float in British history,” the British media received a letter from a London law firm warning the normally aggressive media not to probe into the private lives of the company executives.
Glencore executives, the letter said, “are extremely private individuals”, who expected scrutiny of their business activities, but not their personal lives. A warning followed about the “security risk” that could be posed by any reports about their homes or private lives.
It appears that for the British media the royal family and missing school girls are fair game but not Glencore’s executives.
Although he was referring mainly to the company’s main business, commodity trading, the interview is enlightening.
Asked in an interview with The Wall Street Journal if the company has a work-life balance, the 57-year-old billionaire, a former coal trader, says: “No. We work. You don’t come here to take life easy. And we all got rich from it, so, you know, there’s a benefit from it.”
This competitiveness, he says, is smart business. “If I’m not pulling my weight and setting an example” and “traveling 80% of the time”, his charges would complain to the board and try to get him fired….
Mr. Glasenberg says the phenomenon is still at play. “I see it happening. Some guy suddenly decides: ‘I want to take it easier, I want to spend more time with the family’… an attack will come.”
Mr. Glasenberg, who had been CEO of Glencore since 2002, says he is insistent on instilling this culture at Xstrata, a mining company. Glencore had amassed a portfolio of mines over the past decade. “I thought if we could put our hard-working culture as traders into the asset management it will be a great combination and we did do that,” he says.
One area where Glasenberg does get soft however is on worker mobility, noting that blue collar miners can work their way up to earning the eight-figure salaries enjoyed by his squadron of commodities traders. Just try him.
“You want to be a trader, come be a trader,” he told Wall Street Journal. “You want to travel six days a week, you want to travel the world, the door’s open. I earn more than you. Come be a trader. Please, the door’s open.”
If the Glencore news release is correct, that means in six months, on April 7, 2015, the next move in the future of Rio Tinto will come, unless, as the Glencore news release states “if there is a material change in circumstances”
One thing is clear, Kitimat can now add Rio Tinto and Rio Tinto Alcan to the mix of uncertainty along with Shell, Chevron, Enbridge, Apache and the rest of the corporate movers. In other words, we are all extras in the corporate Game of Thrones.
The cost of the Kitimat Modernization Project has jumped to $4.8 billion US, Sam Walsh CEO of Rio Tinto, the parent company of Rio Tinto Alcan said Thursday as the company released its results for the first six months of 2014.
In its report. Rio Tinto said.
In February 2014, the Group announced that a review of major capital projects had identified a project overrun in relation to the Kitimat Modernisation Project. The overrun evaluation is now complete and has identified the requirement for additional capital of $1.5 billion to complete the project. This was approved by the Board in August 2014, taking the total approved capital cost of the project to $4.8 billion. First production from the Kitimat Modernisation Project is expected during the first half of 2015.
The weakening Canadian dollar appears to have improved the overall bottom line for the RT aluminum division, with underlying earnings of $373 million 74 per cent higher than in the first half of 2013:
The main drivers were growing momentum from the cost reduction initiatives, a weaker Australian and Canadian dollar and a further rise in market and product premiums, with 61 per cent of the Group’s primary metal sales sold as value added product generating a superior price. This was achieved despite a nine per cent decline in LME prices over the period which lowered earnings by $265 million.
The report also contains details of the deal between Rio Tinto Alcan and LNG Canada for the old Eurocan dock, indicating that LNG Canada will not likely commit to a deal until the Final Investment Decision is made:
On 12 February 2014, Rio Tinto entered into an option agreement with LNG Canada, a joint venture comprising Shell Canada Energy, Phoenix Energy Holdings Limited (an affiliate of Petro-China Investment (Hong Kong) Limited), Kogas Canada LNG Ltd. (an affiliate of Korea Gas Corporation) and Diamond LNG Canada Ltd. (an affiliate of Mitsubishi Corporation) to acquire or lease a wharf and associated land at its port facility at Kitimat, British Columbia, Canada. LNG Canada is proposing to construct and operate a natural gas liquefaction plant and marine terminal export facility at Kitimat. The agreement provides LNG Canada with a staged series options payable against project milestones. The financial arrangements are commercially confidential.
According to The Australian other aluminum operations aren’t doing so well, and the newspaper says that RT is starving under performing units in favour of the “good bits.”
The qualifier is that there is still much work to do on the aluminium front, Rio having splurged $US38bn on the acquiring Alcan in 2007.
Aluminium’s contribution to underlying earnings increased from the $US214m in the previous corresponding period to $US373m. But returns remain miserable, and that is from the good bits.
The underlying loss was $US182m, an increase from the $US158m loss previously. At least the bad bits of aluminium are being starved of capital expenditure, with Walsh putting them on the private equity-type approach to running a business.
But is has to be wondered how much longer the pain will be endured. And there is increasing chatter that closures are on the cards, with the long-term future of Rio’s Australian smelters the real concern.
Overall Rio Tinto is making money with earnings up 21 per cent, according to the report:
Sam Walsh said “Our outstanding half year performance reflects the quality of our world-class assets, our programme of operational excellence and our ability to drive performance during a period of weaker prices. These results show that our current strategic and management focus is making a meaningful contribution to cash flow generation.
“During the first half we have increased underlying earnings by 21 per cent to $5.1 billion and enhanced operating cash flow by eight per cent. We delivered what we said we would, exceeding our $3 billion operating cash cost reduction target six months ahead of schedule while producing record volumes and driving productivity improvements across all our businesses.
“We have decreased net debt by $6.0 billion compared with this time last year, through our stronger operating cash flows, sharply reduced capital spend and proceeds from divestments. We are confident Rio Tinto’s low cost, diversified portfolio will continue to generate strong and sustainable cash flows over the coming years. This solid foundation for growth will result in materially increased cash returns to shareholders, underscoring our commitment to deliver greater value.”
Net income increased 156 per cent to $4.4-billion while revenues were $24.3-billion. Rio Tinto said it reduced operating costs by $3.2-billion, exceeding its $3-billion target six months ahead of schedule.
Despite the good news, the financial press is already speculating that Sam Walsh who is 64, may not last long as boss of Rio Tinto. His contract expires at the end of 2015. The Financial Times is quoting analysts as saying despite Walsh’s desire to stay on, the company is already looking for a successor.
According to the FT these include
Andrew Harding, head of iron ore, holds the job that was previously Mr Walsh’s, running Rio’s most important division, and for that reason is probably a front runner. Aged 47, he is a 21-year Rio veteran and previously ran its copper business. Chris Lynch, finance director since 2013, is the only executive on Rio’s board other than Mr Walsh and is another industry veteran, but at 60 is only a few years younger than Mr Walsh.
Alan Davies, head of diamonds and minerals, and Harry Kenyon-Slaney, head of energy, also have important operational experience across commodities and lengthy Rio careers but like Mr Harding are relatively new to their current roles. The heads of the other mining businesses are also relatively new to Rio. Jean-Sébastien Jacques, head of copper, joined Rio in 2011 from Tata Steel while Alfredo Barrios came to the group from BP only in June and is running aluminium.
The US based Natural Resources Defence Counsel environmental group, a major opponent of both the Keystone XL and Northern Gateway pipeline projects, is praising Rio Tinto for divesting its interests in the controversial Alaska Pebble Mine project.
The NRDC is, in fact, so pleased, with Rio Tinto that they took out an expensive full page ad in London’s Financial Times to congratulate the mining and smelting giant which, of course, owns Rio Tinto Alcan and the aluminum smelter in Kitimat. Related Rio Tinto donates $19 million Pebble Mine stake to charity
The National Resources Defence Counsel is often a favourite target for the Harper government and oil-patch conservatives who see it as one of the foreign environmental groups interfering in Canadian affairs.
We’ve gone each year [to corporate shareholder meetings or to meet corporate executives] to fight the Pebble Mine — a 21st Century example of what the mining industry will do if given free reign, based on promises of safety, sustainability, and technological innovation that can’t be kept and must not be believed….
In 2010, I also traveled to Tokyo to meet with leadership of Mitsubishi Corporation, a former significant Pebble shareholder that quietly sold all of its interest in the project eight months later.
This has become an essential aspect of our advocacy with multi-national corporations: meeting privately with company leadership and participating in the once-a-year public gathering of their shareholders, of which – in order to gain access — we are one. Attending the shareholder meetings is no fun, requiring immersion in a world where natural resources are for extraction and exploitation, where representatives from far-flung communities seeking remediation and redress from contamination recount the tragic impacts of mining on their daily lives.
But this year promised to be different for the residents of Bristol Bay – and for those of us supporting their cause.
Reynolds goes on to write that a week after Rio Tinto announced the divestment, they were meeting with RT CEO Sam Walsh and senior executives in the London headquarters:
We were there to thank them for listening to the people of Bristol Bay who, by overwhelming numbers, have consistently voiced their opposition to the mine – a project that embodies the greatest threat ever posed to the economic lifeblood of the region, the Bristol Bay wild salmon fishery.
Each of us in turn – including Bobby Andrew (Yupik elder and spokesperson for Nunamta Aulukestai, an association of Bristol Bay village corporations and tribes; Kim Williams, Executive Director of Nunamta Aulukestai; and Bonnie Gestring, Circuitrider for Earthworks) — delivered a simple message: that Rio Tinto had fulfilled its commitment to Bristol Bay’s communities to act responsibly in a manner consistent with protection of the wild salmon fishery and the wishes of the people who depend on it. Given the scope of the proposed Pebble Mine and the unavoidable risks of contamination associated with its location, there is only one responsible course – divestment – and that is precisely what Rio Tinto had done. The company deserved congratulations, and we conveyed it unequivocally.
Later, meeting with Rio Tinto directors, Reynolds presented the board with a copy of the ad from the Financial Times.
In the blog, Reynolds noted that Vancouver-based Northern Dynasty Minerals is determined to proceed with the project and so the NRDC says “despite major progress against the Pebble project, our work isn’t done, and we remain committed to continuing the fight – along with our Members and activists in support of the people of Bristol Bay.”
In taking out the ad, NRDC’s Taryn Kiekow Heimer, Senior Policy Analyst, Marine Mammal Protection Project, said:
NRDC and its 1.4 million members and activists join the people from Bristol Bay, Alaska Natives, commercial fishermen, sportsmen, jewelers, chefs, restaurant and lodge owners, and conservationists in thanking Rio Tinto for showing environmental and financial leadership by divesting from Pebble Mine.
The Haisla Nation and other groups often quoted NRDC studies on pipelines in their presentations before the Northern Gateway Joint Review Panel.
Rio Tinto had a 19 per cent stake in Northern Dynasty, a Vancouver-based mining company whose main asset is the Pebble project in Alaska.
The FT reports that Pebble is one of the world’s largest known undeveloped copper resources. The project is mired in disagreement because of concern over its potential effect on salmon stocks.
The FT report says the US Environmental Protection Agency said that it would investigate whether fisheries in the region could be protected. The EPA investigation stops any award of environmental permits for the mine in the meantime, and could lead to a permanent block on the project by the EPA.
According to the report, Rio Tinto said it would donate its shares in Northern Dynasty – worth about $19 million Canadian – to two charitable foundations in Alaska: the Alaska Community Foundation, which funds educational and vocational training, and the Bristol Bay Native Corporation Education Foundation, which supports educational and cultural programmes in the region.
The Pebble Mine would be near rich salmon rivers which flow into Bristol Bay, Alaska. Opponents of the project fear that the giant mine would irreversibly damage salmon stocks for centuries to come.
Royal Dutch Shell has said it will deploy more Chinese equipment at its struggling US shale business – becoming the latest natural resources company to try to reduce costs by switching to cheaper Asian suppliers.
Miners such as Rio Tinto and Antofagasta have already been encouraged by improvements in the reliability of Chinese machinery, which they say can now be integrated into their existing operations without compromising efficiency or safety standards….
Shell’s move comes as oil and mining companies – which ramped up capital expenditure in recent years amid a huge commodities boom – are being pressed by shareholders to curb spending and improve returns….
Rio Tinto, the Anglo-Australian miner, has also been on a spending spree in China. The company, which is slashing its capital spending after disappointing investors with cost overruns, says it made close to $2bn-worth of equipment purchases in China last year, and around $1bn-worth in India.
Rio Tinto Alcan has said that much of the building materials and equipment for the Kitimat Modernization Project has come from China, often in huge modules which are then inserted into the new buildings as part of the aluminum smelter upgrades.