PERTH (miningweekly.com) – Diversified major Rio Tinto copper and coal CEO Jean-Sébastien Jacques said this week that diversification of mining companies’ portfolios was no longer seen as a hedge against bad times.
Speaking in Sydney, he predicted that there would be a shift towards a multi-specialist model, as mining companies looked to simplify operations in the current market. “By this I mean we may start to see less of a push towards diversification in the development and growth of mining companies’ portfolios.”
Jacques said that those companies with less diversified portfolios, which were running tier-one operations, were currently performing better.
“I believe future value creation in the industry will be focused on the balancing of both risk and reward. Expectations will need to shift.”
Meanwhile, Jacques also reported that Rio Tinto was “excited” about the future of its copper, iron-ore and bauxite assets, despite the current economic downturn, adding that the company was running its business on a long-term consideration.
“We run international businesses which must remain competitive at any point of the cycle. With this in mind, I still see plenty of opportunities for us miners. At some stage the winds will change and we will be asked how we are planning to grow the topline, not just manage the bottom.”
“This is why we have the confidence to invest in these areas,” Jacques said.
He noted that, since 2012 Rio had consistently worked to reduce costs and capital expenditure, having delivered about $5.4-billion in cash cost reductions.
“We’ve reduced capital expenditure from a high of $17-billion in 2012 to a forecast of around $5.5-billion this year. We’ve rationalised our business to focus on a core set of tier-one assets - we’ve announced or divested $4.5-billion of assets since January 2013.
“Most importantly, we’ve been focused on cash generation and profitability.”
Jacques said that while Rio expected subdued commodity prices to remain in the short term, the company was optimistic about long-term demand.