Posted: September 3, 2013 |  AUTHOR: KEN FOX | CONTACT ME

 

What is al the buzz about Rio Tinto? Who are they, what do they do and why all this news? In short, Rio Tinto is a leading global mining and metals company based in London, England. More specifically, Rio Tinto’s business is finding, mining and processing mineral resources. It was founded in 1879 and named after some men restarted a copper mine on the Tinto (or Red) River in Spain, with Rio Tinto standing for Red River.

The company has approximately 71,000 employees working in over 40 countries. Their annual sales were 50.967 billion U.S. dollars in 2012. The public company is traded on the New York and London Stock Exchanges. Additionally, a subsidiary, Rio Tinto Limited, is listed on the Australian Securities Exchange.

Currently, the company has five business or product groups:
1. Aluminum
2. Copper (group also produces gold, silver and molybdenum)
3. Diamonds and minerals (group also provides borates, salt, titanium and zircon)
4. Energy (includes producing uranium ore and oxide)
5. Iron ore, the key ingredient in steel (has mines in Australia and Canada)
These business groups are supported by exploration, technology and innovations business teams.

The company grew tremendously during the twentieth century through acquisitions:
Acquired Rhodesia (Africa) Mining Company in 1929
Rio Tinto merged with an Australian company called Consolidated Zinc in 1982
It acquired the U.S. Borax company in 1968 (bauxite is the natural ore that is used to make aluminum metal)
Kennecott Utah Copper (USA) and British Petroleum (BP) Australia’s coal assets were bought from BP in 1989
Rio Tinto acquired an Australian company, North Limited, which owns iron ore and uranium mines
They acquired the Canadian aluminum company, ALCAN for 38.1 billion U.S. dollars in 2007

alcan

In two parts, 2010/2011, Rio Tinto acquired Ivanhoe Mines (copper) in Canada for a total of 2.36 billion dollars. Ivanhoe’s name was changed to Turquoise Hill Resources, Ltd on August 2, 2012.

Now the Real News

Rio Tinto’s big news is the start of a huge mining site in Mongolia to supply cooper to nearby China. The mine is, Oyu Tolgoi, made its first truck shipment of copper ore to China on July 9, 2013.

map

Some noteworthy facts:
1. The Oyu Tolgoi mine operation has taken about three years and cost $6.2 billion U.S. dollars.
2. The amount of copper ore beneath this site is about the size of Manhattan (one of the boroughs in New York City), and clearly one of the largest copper mines in the world.
3. The deposits are estimated to be 70 million years old, when dinosaurs roamed the Gobi.
4. The mine and a town were created in the Gobi Desert (Mongolia) approximately 100 kilometers (62 miles) from the Mongolia-China border, and about 376 kilometers from the country’s capital, Ulan Bator.
4. Many permits and Mongolian government negotiations were needed to finalize this operation, 66% owned by Rio Tinto’s subsidiary Turquoise Hill Resources, with the remainder owned by the Mongolian government.
5. It’s man made town or city includes an airfield, multiple buildings, dormitories, pizza parlors, canteens, a hair salon, movie theaters, a supermarket, bars and basketball court to help satisfy the needs of about 8,000 employees who live and work there.
6. The goal is for a truck to leave the mine for China with copper concentrate every nine minutes, 24 hours a day. Three-one-hundred ton Komatu trucks operate in temperatures as low as 40 degrees F below zero in the winter to 120 degrees F in summer, delivering thousands of tons of ore to a crusher 24 hours a day.

7. When fully operational, Oyu Tolgoi is expected to produce an average of 450,000 metric tons of copper and 330,000 ounces of gold a year, as well as silver and molybdenum.

mine

The Oyu Tolgoi mine in Mongolia

The project is expected to bring new jobs, and has expectations to improve healthcare and education for Mongolia’s 2.9 million people. However, the project is also raising concerns about the water supply in Mongolia’s most arid region. Oyu Tolgoi will use 696 liters of water a second to process ore into copper concentrate. Rio Tinto found water about 40 kilometers from the mine in what is called an ancient aquifer, 400 meters below ground. The mine will consume 20% of the water from the aquifer, which is not fit for human or animal consumption.

The Mongolian government and the World Bank are studying options to channel water from the Orkun River to the Gobi via an aqueduct. An impact study should be available by the end of 2014.

Commentary
Rio Tinto has helped the most sparsely populated country in the world to begin thriving. Their Oyu Tolgoi mining effort helped generate an impressive 17.5% growth rate for Mongolia in 2011 and a 12.3% rate in 2012. It has created employment, new roads, provided electricity, water and modern conveniences in a location where it never existed before. Like any such massive endeavor there are people concerned or who complain about the environmental impact. From 1924 until the 1990’s, Russia’s influence has been greater in Mongolia than China. However, the increased trade represented by the Oyu Tolgoi project can help build better relations between Mongolia and China. Mongolian officials think China will want to annex Mongolia, like it did in Hong Kong, Macau and ideally, want to do the same with Taiwan.

Rio Tinto, through the Oyi Tolgoi mine, is helping Mongolia to be one of the fastest growing economies in the world. It’s also helping to create a positive or at least a better image for a country that has kept a low profile, often been misunderstood and in need of an economic boost.

Resources:
1. Rio Tinto 2nd Quarter 2013 Operations Review
2. Though Not Yet Open, a Huge Mine is Transforming Mongolia’s Landscape, New York Times, September 12, 2012.
3. Few Roads Leading to China Tell Tale of Mongolia Fears, Bloomberg, July 4, 2013.
4. Rio Tinto Starts Shipping Copper from Oyu Tolgoi, The Wall Street Journal, July 9, 2013
5. Where Raptors Roamed Rio’s Dream Stirs Water Worry, Bloomberg, July 10, 2013.
6. Rio Tinto Company Profile, Reuters.com

SUBSCRIBE to our Newsletter   

 

©2017, The Global Galaxy blog is produced by The Soundings Group, LLC, Charleston, South Carolina, USA, www.thesoundingsgroup.com. The company is an international business consulting firm, specializing in new market assessments, market entry strategies and marketing guidance. The scope of Global Galaxy is to cover timely international trends, issues and business building ideas. Its purpose is to educate, inform and stimulate thinking for business opportunity analyses.

 

Comment