COLUMN-Rio Tinto's iron ore hope at odds with foresight claim: Russell
(The opinions expressed here are those of the author, a columnist for Reuters.)
By Clyde Russell
LAUNCESTON, Australia Feb 15 (Reuters) - - "We don't run our business on hope, we run it with foresight and focus." These are Rio Tinto Chief Executive Sam Walsh's words, but he's only half right.
Walsh was speaking at a Feb. 11 briefing after Rio Tinto released its worst underlying earnings in 11 years, slumped to a net loss and ended its policy of increasing its dividend payments.
It's no surprise that the ever-polite Walsh felt the need to engage in a bit of what may be termed fighting talk, as he tried to defend the scrapping of the progressive dividend policy amidst an increasingly bleak outlook for commodity prices and the global economy.
Where Walsh got it right is that Rio is run with ruthless focus, and Walsh and his executive team deserve credit for driving costs down to the point where a tonne of iron ore can be mined in Western Australia and delivered to an export harbour for around $15 a tonne.
This focus is helping the world's number two producer of the steel-making ingredient keep underlying earnings positive, even though the spot price of iron ore in Asia .IO62-CNI=SI was$43.20 a tonne on Feb. 12, barely one-fifth of what it fetched at its peak in 2011.
But where Walsh is on shaky ground is the idea that Rio Tinto has been run with great foresight.
The much-criticised forecast that China's steel output will rise to 1 billion tonnes a year by 2030 didn't seem to be mentioned in the post-results briefing. Continuación...