The world’s 2nd largest miner Rio Tinto (NYSE:RIO) sees the bad times for the industry coming to an end and says its top management will soon stop focusing on cost cuts to make room for growth alternatives.
Since assuming the company’s leadership in January last year, CEO Sam Walsh, 64 anni, has taken several measures to build a more focused and accountable business, including aggressive cost cutting measures that saw the firm firing hundreds of people, shelving projects and selling non-core assets.
As a result the company, the world’s No. 2 iron-ore producer after Brazil’s Vale (NYSE:VALE) achieved higher underlying earnings of $10.2-B in Y 2013, driven by its iron ore division and cost cutting, and increased dividends by 15%.
Rio’s Chairman Jan Du Plessis was quick to provide investors with a reality check. While he was optimistic, he warned the world economy remains volatile and the political environment has become more fragile.
He noted that Rio tends to out-perform most market indexes during times of such difficulty, and that meant the company should be able to capitalize over the next couple of years.
“If we play our cards well, a volatile world should actually suit us well,” he added. “In really healthy boom conditions as a company we tend to be outperformed by the minor indexes.”
Copper assets in sight
Rio said it is not planning major acquisitions this year, but the company will focus expanding its iron ore and copper businesses, its 2 largest divisions.
For Mr. Walsh, the most obvious and significant growth opportunities for Rio are in the Red metal sector.
He said the company has high expectations for its Resolution project in Arizona, which has the potential to become North America’s largest copper mine. He added Rio looks forward to proceeding with the underground development of Oyu Tolgoi in Mongolia.
Other expansion opportunities include the La Granja project in Peru and a planned bauxite operation in Australia’s Queensland state.