August 27, 2008
Rio Tinto Looks East for Credit Crunch Protection
By Peter McCusker
RIO Tinto has unveiled a 55% jump in earnings and said prices for its products remained strong in the face of the global economic downturn.The group, which became the world's biggest aluminium company following the acquisition of Alcan in 2007, said demand from China and India meant the impact of the credit crunch had been modest in its key markets.
London-based Rio reported underlying earnings of EUR5.47bn (pounds 2.96bn) in the six months to June 30, with half-year production records achieved in areas including iron ore, bauxite, aluminium and thermal coal.
Chairman Paul Skinner said: "The driver of demand for our products is urbanisation and industrialisation in heavily populated countries like China and India, and these economies continue to grow strongly. Prices for our products remain high by historic standards."
Rio employs more than 1,000 people in the UK, including at a smelting operation in Anglesey and at former Alcan sites at Lynemouth in Northumberland - where it has over 600 employees - and Lochaber in the Scottish Highlands.
Rio said Alcan's large source of hydro-based power was a major competitive advantage at a time of worldwide energy shortages, including in China.
The company also repeated its opposition to attempts by BHP Billiton to acquire the company in what would be the biggest takeover in the sector and create a mining giant controlling huge iron ore, copper and aluminium deposits.
The takeover move, which is currently the subject of a review by EU competition authorities, has been rejected on value grounds by the Rio board.
Mr Skinner added: "The group's performance in the first half, together with our growth potential, supports the boards' view that Rio Tinto presents a very strong standalone value proposition for shareholders."
However, analysts' concerns of the slowdown in the global economy saw the stock price fall by over 1%.
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