Consolidation and operating on a larger scale were important considerations for mining companies to continue to meet the challenges of growing demand for their products, high input costs and competition for exploration ground, Rio Tinto CEO Tom Albanese said on Wednesday.

“Scale really does matter,” he said.

Albanse's comments, which echoed remarks by Raw Materials Group president Magnus Ericsson earlier in the week, are particularly interesting when considered in light of his company's steadfast rejection of a takeover bid from rival BHP Billiton, which has made a preconditional offer of 3,4 of its own shares for every Rio Tinto share.

Rio Tinto says that the proposal undervalues the company and its prospects.

However, “scale confers a greater ability to compete, not only with other miners, but with the world's global businesses,” Albanese said in a speech at the Prospectors and Developers Association of Canada convention, in Toronto.

While the the most important reason for consolidation was that it unlocked value, scale also helped companies to attract the best skills and to developed improved technologies, both of which were key to sustaining supply.

However, he declined to comment after the presentation on whether the comments were a message to BHP Billiton.

“We're just saying that it's all about value,” Albanese told reporters.

The mining industry was facing new challenges, and “the most basic challenge is the need to find big orebodies in a world that's increasingly hungry for metals”, he said

“To step up supply we're going to be challenged to develop resources that in the past were either considered to be too complex or too deep or too low grade or in regions with high country risks and poor infrastructure.”

Albanese repeated comments made earlier this year that Rio Tinto expects demand for metals from China and India to more than make up for a slowdown in the US.

“We look forward to what we believe will be a multidecade period of strong metal and mineral demand,” he said.

BHP BID SPEEDS GROWTH

Albanese also said that BHP Billiton's hostile offer had spurred Rio Tinto to speed up exploration and place greater emphasis on growth.

“First with [the acquisition of] Alcan, and now with the rejected BHP Billiton takeover offer, this has given us a spur for Rio Tinto to undergo great change at an exhilirating pace” he said.

BHP Billiton's offer requires acceptance from more than 50% of Rio Tinto shareholders, and the company must secure regulatory approvals for the deal in several jurisdictions before it can send out offer documents.

Dow Jones Newswires reported on Wednesday that BHP Billiton chairperson Don Argus expected the company to take until late 2008 to clear competition and other regulatory hurdles, before posting an offer to Rio Tinto shareholders.

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