To what extent is Rio Tinto PLC (LSE:RIO) in control of its own destiny?
Within the space of a few days the company has been summarily ejected from one country in which it was having considerable difficulties – Serbia – and welcomed back into the fold in another – Mongolia.
How much of any of this is really business, and how much pure politics is an open question?
But then, can business ever really be separated from politics?
Rio poses all the existential questions.
Anti-Rio Tinto feeling isn’t hard to find. There’s been plenty of it around for years, and that was before the company deliberately courted an ESG PR disaster by dynamiting ancient aboriginal burial sites in Australia.
The original Rio Tinto, the area in Spain from which it all sprang, remains an apocalyptic post-mining landscape to this day, and over the years there have even been proposals to mine the Gulf of Seville because of the amount of waste that Rio Tinto historically has flushed into the Mediterranean.
But whether Serbian politics or Mongolian politics are that much more noble is an open question.
The great Serbian hero-of-the-hour, Novak Djokovic, has been backing anti-Rio protests for some time. And it may not be coincidence, given Rio’s extensive Australian interests, that Djokovic’s summary eviction from the Lucky Country was followed fairly swiftly by the ejection from Serbia of a major player in the Australian economy.
Is Rio Tinto really Australian?
According to Wikipedia it’s Anglo-Australian, but for what its worth it has more mines in Australia than it does in the UK, not to mention an Australian listing, although the Australian representation at board level is thinner than you might expect.
Either way, eviction from Serbia, whether on spurious or meaningful grounds, is not a good look for a company that’s been in searching vainly for a major PR success for years.
So it was very handy that just in the nick of time negotiations with the Mongolian government over the funding for a major expansion programme at the huge Oyu Tolgoi mine were suddenly resolved.
By 2030, and assuming completion of the expansion plans, it’s expected that Oyu Tolgoi will be the fourth largest copper mine in the world, so we’re not talking small potatoes here.
Nor are we talking small potatoes when it comes to the terms of the settlement. Various complexities obscure its true nature, but it looks as though the Mongolians will be forgiven a previously agreed debt of US$2.4bn as part of the conditions that will allow development work to be completed.
Judging the fairness of these terms is almost impossible from the outside, but this looks like a victory for the government rather than Rio Tinto.
Even Rio’s language was muted. “It’s a major relief,” said Rio chief executive Jakob Stausholm.
As to what really unjammed the logs? – we’ll probably never know.
It could be that Rio was nervous about community relations falling apart in yet another country of operations.
Or it could be more mundane than that. The expansion at Oyu Tolgoi is already suffering from significant cost overruns.
Billions of dollars have already been spent on it, and the copper’s no good to the government or the Oyu Tolgoi joint venture partners if it’s still in the ground.
What’s more, most analysts expect a relatively strong copper market for at least a decade. After that, it gets hard to forecast. The smart move is to get on and get this thing built.
As to who ends up paying for it, that was a matter of who blinked first. In the latest phase of this ongoing saga, it looks like that was Rio.