RIO Rio Tinto Plc

By Rhiannon Hoyle 

BRISBANE, Australia-- Jean-Sébastien Jacques will take the job as Rio Tinto PLC's chief executive in July with an unusual commodity among major mining companies: a growth strategy.

As rivals including Anglo American PLC and Glencore PLC sell assets to raise capital, Rio Tinto is laying out plans for new mines, seeking pole position when world commodity markets recover.

On Thursday, outgoing CEO Sam Walsh said Rio Tinto is completing plans on its Mongolian Oyu Tolgoi underground copper mine, a roughly $6 billion project. A proposal to develop a new iron-ore mine in Western Australia, called Silvergrass, will be assessed "in the relative near-term," he said. In November, Rio Tinto approved a $1.9 billion bauxite project in northeastern Australia, which it aims to complete in 2019 and use to feed China's demand for the mineral, the raw material of aluminum.

Rio Tinto announced in March that Mr. Walsh would step down after 3 1/2 years in favor of Mr. Jacques, its former copper chief. Known in the industry as J.S., he has been the driving force behind Oyu Tolgoi in recent years.

"I expect J. S. and the team will continue to take those [projects] forward," Mr. Walsh told reporters after Rio Tinto's Australian shareholder meeting on Thursday. "It is a good place for us to be that we can be countercyclical during the cycle."

The company, which has spent billions in recent years to expand its network of iron-ore pits and infrastructure in Australia's west, has been criticized for its reliance on iron ore, which in December fell to its lowest price in roughly a decade. That same month, Rio Tinto and its Oyu Tolgoi partners-- Turquoise Hill Resources Ltd. and the Mongolian government--lined up a combined $4.4 billion from 20 lenders to fund the expansion of the project, expected to become one of the world's biggest copper operations.

Most miners have put a pin in new investments as they look to conserve cash and ride out the downturn, though Anglo-Australian rival BHP Billiton Ltd.--having slowed new projects--recently signaled an interest in acquiring mines or oil fields from rivals.

Rio Tinto has rolled out a growth blueprint despite its leadership's downbeat view of commodity markets. At the shareholder meeting, Chairman Jan du Plessis expressed caution on China, the biggest buyer of commodities such as iron ore and copper. Soft readings on manufacturing have raised doubts about Beijing's recent economic stimulus, including strong credit expansion and a front-loading of 2016 infrastructure budgets.

Mr. Walsh said he is "somewhat negative" on the iron-ore market, in contrast to those forecasters who project it has passed its nadir. The price has rebounded to $61 a metric ton from a low below $37 in December, aided by surging futures speculation in China and better profits at steel mills.

"The wild card in relation to iron ore at the moment is the Dalian metal-futures exchange where there are huge quantities of iron ore being traded," said Mr. Walsh. "That is having an impact on people's view of iron-ore pricing." Volume and prices have retreated in recent days, since Dalian Commodity Exchange imposed measures to cool speculation, including increased transaction fees.

Mr. Jacques acknowledged the difficult road ahead. "The macroeconomic environment is tough, and is likely to remain so for the foreseeable future, from whichever way you look at it," he said. He sees his job as advancing Rio's best projects and further increasing its cash reserves.

Having cut operating costs by $6 billion as commodities slid, Rio aims to cut another $2 billion in two years.

"I think right now is a good time for me to pass the baton, with the company being as strong as it is," said Mr. Walsh. "It is a good place where you have stabilized the business and it provides the opportunities for growth."

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

(END) Dow Jones Newswires

May 05, 2016 04:23 ET (08:23 GMT)

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