World’s No.2 miner Rio Tinto (LON, ASX:RIO) said Tuesday that cost inflation driven by rising oil prices and a resurgence of resource nationalism are increasingly affecting mining companies’ investment decisions.
Speaking at the Bank of America Merrill Lynch conference in Miami, chief executive Jean Sebastien-Jacques said he remained optimistic about the medium to long-term global growth outlook. However, he mentioned volatility in markets, trade wars and governments efforts to get greater share of their mineral wealth — most times to the detriment of private companies — as growing concerns for investors in the natural resources sector in the short-term.
“From the DRC and South Africa to Mongolia and Australia [resource nationalism] is gaining momentum,” he said, adding he was optimistic that common sense in all those cases would prevail.
Major miners operating in the Democratic Republic of Congo, Africa’s top copper producer and source of over 60% of the global cobalt supply, are vigorously fighting a new mining code. The fresh legislation strips away a stability clause protecting existing investments from changes to the fiscal and customs regime for 10 years, introduces a 50% windfall profits tax and gives powers to the mines minister to hike royalties on minerals considered “strategic”.
It all began in Indonesia, which imposed new rules on the exports of unprocessed ore early last year. Tanzania followed suit imposing two months later a ban on exports of gold concentrates. Something similar happened in South Africa, which last year unveiled a revised mining code that would have imposed a 1% tax on mining companies’ revenues – as opposed to their profits, as is common.
In Mongolia the government claims that Oyu Tolgoi, a copper joint venture run by Rio, owes $155 million in unpaid taxes. A claim the company denies.
Miners are also facing higher costs, Jacque said. “In this environment, asset quality really matters and operating capability is critical. Protecting margins and generating cash will be hard across the industry.”
Rio’s boss said that, despite the challenges, the industry should continue its efforts to keep costs and debt under control and so deliver better returns to shareholders.
“This is why we are actively shaping our portfolio to focus on the best assets…… in commodities with sound long-term fundamentals. This will further drive sector leading return on capital employed,” he said, adding that last year Rio Tinto was responsible for half of the total cash returns across the sector.
Tell us what you make in a year, then lets have a discussion.
It need more engagements not to hear one side view
In some areas Rio tinto companies mines for free and nothing is given back to communities at the end we will be left with deserts
Resource Nationalism is a SYMPTOM of a much larger problem…..it’s called OVERPAID, crappy leadership in these large mining companies and no focus on making money for their shareholders……to them it’s more a social event to see how many people the company employs, to appease the governments’ mandates and whims. This is being accomplished by BRIBING certain government officials with kickbacks or percentages, this type of theft from the citizens of these developing countries is getting real old..?
In my opinion mining “leadership” has caused this to happen, by CREATING this environment.
This is why mine funding has all but dried up…you can only SCREW your shareholders for so long and then they go somewhere else to invest….like FAKE miners….Mining a FAKE commodities…Bitcoin comes to mind?
One day soon… the light will come on to survive….HIGH GRADE…it’s what’s on the menu for PROFITS!
Simple logic is Consumer and demand for the mineral commodities determine the market. if the demand in market is very high the prices also increase so the resource producing countries also levy more government fees.
This is the responsibility of the mining companies to produce the mineral commodities in cost saving method by adopting loatest technology and in systematic approach in all deepseated mineral resources..