15/07/2009 - 13:49

Rio ore record as bribery claims widen

15/07/2009 - 13:49

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Rio Tinto has posted record quarterly iron ore production at its Pilbara operations amid speculation of further bribery claims against the company in the Chinese media.

Rio Tinto has posted record quarterly iron ore production at its Pilbara operations amid speculation of further bribery claims against the company in the Chinese media.

One of China's most prominent state-run newspapers alleges Rio bribed executives from all 16 of China's major steel mills. The company's chief iron ore negotiator was detained almost two weeks ago by the Chinese government amid claims of espionage and, later, bribery.

A Rio spokesperson told WA Business News the company is "committed to high standards in business integrity and takes its ethical responsibilities very seriously".

Rio remained tight lipped on the matter but reported today an 11 per cent increase on the corresponding 2008 quarter in iron ore production at its Pilbara operations to 53 million tonnes (mt). The company's attributable share was 42mt.

Rio has also maintained it production guidance for the rest of the calendar year as it tips continued a recovery in Chinese steel demand for the rest of the calendar year.

Total shipments from the Pilbara during the quarter totalled 52.5mt, 33 per cent higher than the previous quarter, and a 14 per cent increase on the same quarter of 2008.

But even the shipping news invited intrigue, with reports that Rio Tinto and BHP Billiton had stopped supplying the spot market for iron ore.

The China Daily reported in a front-page article today that Rio targeted key executives for Chinese firms who negotiate iron ore prices with large foreign suppliers. The paper cited just one unnamed industry insider.

"Rio Tinto got to know the key executives of the 16 steel mills, who have sensitive industry information, when the China Iron and Steel Association brought them to the bargaining table," said a senior manager at a large steel company, who requested anonymity, the paper said today.

The claims come amid tense times for Rio Tinto, with the arrest of their negotiator Stern Hu becoming an international incident.

The timing follows both the snubbing of Chinalco which wanted a cornerstone investment in Rio Tinto, as well as the culmination of tough negotiations over ore prices and word of big stockpiles of ore in China.

Amid this, Rio Tinto will want to be seen as doing business as usual, as well as showing how much its ore is needed.

Global iron ore production rose to 45.16mt in the three months ended June 30, from 41.48mt in the same period in 2008.

Rio Tinto said its calendar 2009 iron ore guidance for the global operations, including Australia, Canada and Brazil, remained at around 200mt, "with the recovery in Chinese steel demand expected to continue into the second half of 2009."

The group's refined copper production rose 23 per cent in the second quarter to 102,000 tonnes, from a year ago, with the company citing an improved performance and higher concentrate grades at the Kennecott Utah Copper and higher cathode production at its Escondida operation in Chile.

"Markets remained tough in the second quarter, as expected, particularly in aluminium," Rio Tinto chief executive Tom Albanese said in a statement.

"The production curtailments announced in January in this product group have started to take effect and are reflected in this report."

The company's second quarter output of bauxite fell 14 per cent to 7.22 Mt, alumina was down six per cent to 2.14 Mt and aluminium down five per cent to 942,000 tonnes from the same period in 2008.

"Rio Tinto Alcan's share of global bauxite production in 2009 is expected to be approximately 31 million tonnes, a decline of 11 per cent on 2008," it said.

Output for hard coking coal - used in the production of steel - fell seven per cent to 1.90 Mt, with Rio Tinto blaming the impact of wet weather on its Queensland coal operations.

Rio Tinto also said about half of the iron ore it produced this year so far had been sold on a spot market basis.

Mr Albanese said the company was continuing to press ahead with it debt reduction plans, and citing a recent $US15.2 billion ($A19.13 billion) rights issue and $US3.7 billion ($A4.66 billion) of divestments.

"We continue to press ahead with actions to reduce costs across the board, align production with demand and bring down levels of net debt," he said.

Elsewhere, the company said its share of uranium production rose 16 per cent in the second quarter from the corresponding quarter in 2008.

Its majority owned Energy Resources of Australia Ltd (ERA) increased uranium production by 33 per cent thanks to improvement in ore grade and plant utilisation, it said.

Rio Tinto's Diavik and Argyle diamond mines both recorded steep drops in production.

At Argyle diamond production was 408,000 carats, off 86 per cent on the second quarter of 2008, while production at the Diavik mine in Canada, was down 44 per cent, to 853,000 carats.

"Both prices and sales volumes for diamonds have been severely impacted by the economic downturn," Rio Tinto said.

Exploration and evaluation spending dropped, as the debt-laden mining company tried to reduce operating costs.

Earlier on Wednesday Coal & Allied Industries Ltd, which is about 75 per cent owned by Rio Tinto, announced saleable coal production for the June quarter of 4.4 million tonnes, down 7.2 per cent on the same period last year.

Coal & Allied's share of coal sales was about 4.63 million tonnes, similar to the 4.66 million tonnes in the corresponding quarter last year.

Rio bribed executives from all 16 of China's major steel mills, one of China's most prominent state-run newspapers alleges.

Rio targeted key executives for Chinese firms who negotiate iron ore prices with large foreign suppliers, the China Daily reported in a front-page article, although it cited just one unnamed industry insider.

"Rio Tinto got to know the key executives of the 16 steel mills, who have sensitive industry information, when the China Iron and Steel Association brought them to the bargaining table," said a senior manager at a large steel company, who requested anonymity, the paper said today.

"And then Rio Tinto bribed them (to get access to industry data), which has become an unwritten industry practice," the source said.

"If companies didn't accept, they would have cut supplies and so the whole steel industry has been bribed."

The English-language China Daily is often used by the government to deliver a message to a foreign audience.

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