Rio chief says BHP offer undervalues Rio assets

June 16, 2008

June 16th (Reuters) – Global miner Rio Tinto (RIO.AX: Quote, Profile, Research, Stock Buzz) (RIO.L: Quote, Profile, Research, Stock Buzz) talked up its growth prospects on Monday, insisting a major new iron-ore project was still on track, as it sought to fend of a hostile, $180 billion bid from rival BHP Billiton.

Rio Tinto has rejected as the all-share proposal as too low from BHP, which wants to buy its nearest rival to cut costs, grab a bigger share of world metals markets and boost pricing power.


“We remain confident that the medium- to long-term trend is for a sustained and substantial increase in demand for metals and resources,” Rio Chief Executive Tom Albanese told an Australia-Israel Chamber of Commerce luncheon.


BHP is offering 3.4 of its own shares for each Rio share.


In stressing Rio’s growth prospects, Albanese sought to ease some concerns surrounding its giant iron-ore project at Simandou in the west African country of Guinea. Last week, Rio said Guinea was reviewing its award of the mining concession.


“We are confident. We are continuing to proceed with the project,” Albanese told reporters.


He also said there was a case for caution in allowing investment by foreign state-owned entities in Australia’s booming resources sector, but added that their money also provided opportunities for growth.


“Certainly the emergence of sovereign wealth funds has attracted plenty of headlines in recent months,” he said.

“While I agree there is a case for prudence, I don’t think that Australia would want to miss out on this substantial opportunity by not taking advantage of the full breadth of global capital and global relationships that might be on offer in its own region.”


State-backed Chinese metals firms have been looking to boost their interest in Australian raw-materials suppliers. Aluminium group Chinalco in March bought a 9 percent stake in Rio.


Press reports last week said three Chinese steel makers, Baosteel (600019.SS: Quote, Profile, Research, Stock Buzz), Wugang and Angang (0347.HK: Quote, Profile, Research, Stock Buzz), hoped to come together to invest in BHP.


BHP chief Marius Kloppers said last week he would not be surprised if a Chinese entity took a stake in BHP.


China has also been looking to increase its stakes in small and medium-sized Australian miners and prospectors, partly in response to the surge in prices being charged by the global giants like BHP and Rio.


In a separate announcement on Monday, Rio, the world’s second-largest iron ore miner, said it would spend $350 million to introduce driverless trains on its iron-ore railway in western Australia.


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