Rio Looks to Boost Ties to Junior Miners as Spending Declines

Rio Tinto Group (RIO), the world’s second-largest mining company, is seeking to work more with smaller competitors on exploration as the industry cuts spending and sells assets to bolster earnings.

Junior miners are “doing it tough, which means deals are more realistic if you are sitting on my side of the table,” Stephen McIntosh, Rio’s head of exploration, told reporters yesterday in Sydney.

Global exploration spending across the industry, excluding bulk commodities, fell to about $15 billion last year from a peak of almost $20 billion a year earlier, while the number of discoveries has slipped from a 2007 high, according to MinEx Consulting Pty data, cited by Rio. Rio more than halved spending on exploration and evaluation last year to $948 million.

Sam Walsh, a 23-year Rio veteran, has reduced costs and driven productivity gains since becoming chief executive officer in January 2013 amid an industrywide push to preserve profitability as some commodity prices slide.

“This is actually the perfect market for us to be even more aggressive,” McIntosh said. “We can do much more cost effective deals today than what we’ve been able to do for the last decade.”

Rio’s central exploration budget averages about $200 million a year, he said. Rio is exploring for seven different commodities, from iron ore to copper, across 18 countries, according to the company.

“We’d be delighted to do more with the juniors,” McIntosh said. “We would have been delighted through the cycle to do more with juniors. But we wouldn’t participate because it wasn’t a good use of shareholders’ money because their expectations were unrealistic.”

To contact the reporter on this story: James Paton in Sydney at jpaton4@bloomberg.net

To contact the editors responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net Keith Gosman

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.