Rio Tinto wary of 'ongoing disruption' to world economy

26th May 2010, Comments 0 comments

Anglo-Australian miner Rio Tinto warned Wednesday of the risk of "ongoing disruption" to the global economy but said it remained confident of long-term Asian demand for its raw materials.

Chairman Jan du Plessis said the company was cautious about the near-term economic outlook, citing volatility caused by Europe's debt problems and inflationary pressures in Asia.

"Asian countries are having to contend with inflationary risks arising from the massive economic stimulus packages that were put in place last year," he told the company's annual general meeting.

"At the same time, we have seen the recent sovereign debt crisis in Europe and its sweeping contagion into financial markets around the world.

"This illustrates the potential for persistent economic imbalances and hidden risks to cause ongoing disruption to global economic activity."

But du Plessis said China's demand for iron ore, copper, coal and aluminium was expected to continue growing over the next 15 years, at which point higher demand from India was expected.

"The long-term outlook therefore continues to make our business an attractive proposition."

Rio said its iron ore division, the largest contributor to underlying earnings, achieved a record performance in 2009 despite the global financial crisis and weather-related interruptions.

Chief executive Tom Albanese said: "The outlook for global iron ore remains very positive and growth fundamentals remain the same as before the financial crisis, dominated by the rise of China."

He said despite the worst downturn since World War II, the factors driving the developing world's industrialisation remained in place and the company expected demand for iron ore, aluminium and copper to double by 2025.

"We also expect substantial increased demand for energy," Albanese said.

He said the company was working hard to resolve difficulties with major market China, where four former executives of the company were jailed on bribery and commercial secrets charges in March.

"I am determined that these events will not affect our commitment to improve our relationship with China," Albanese said.

Albanese said Rio had halved its debt in 2009 -- slashing it to 18.9 billion US dollars -- and had cut a further 4.5 billion US dollars from net debt in the first quarter of 2010.

Executives from Rio Tinto, one of the world's biggest miners, also repeated their attacks on Australia's proposed retrospective 40 percent tax on the "super profits" of resources companies.

Du Plessis accused the government of a "scandalous" misrepresentation of the issue during rowdy debate in recent weeks.

"Applying this tax retrospectively is a dangerous prospect and has the potential to destroy Australia's hitherto excellent reputation in the global community," he said.

© 2010 AFP

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