Riotinto Mar 08

22862_Cover

22/2/08

17:31

Page 7

Review

Issue 85 March 2008

Brave new world in London W2 Return to nickel Special supplement Introducing Rio Tinto Alcan

22862_IFC-p01

27/2/08

14:23

Page 6

Cover: brave new world in W2 – the reception area of Rio Tinto’s new regional centre in London. Story, pages 8-12. Back cover: members of a Richards Bay community weed their squash plots. Story, pages 13-15.

Rio Tinto is a leading international mining group headquartered in the UK, combining Rio Tinto plc, a London listed public company, and Rio Tinto Limited, which is listed on the Australian Securities Exchange. Rio Tinto’s business is finding, mining and processing mineral resources. Major products are aluminium, copper, diamonds, energy (coal and uranium), gold, industrial minerals (borates, titanium dioxide, salt, talc), and iron ore. Activities span the world but are strongly represented in Australia and North America with significant businesses in South America, Asia, Europe and southern Africa. The Group’s objective is to maximize the overall long term return to shareholders through a strategy of investing in large, cost competitive mines, driven by the quality of each opportunity, not the choice of commodity. Wherever Rio Tinto operates, the health and safety of its employees is the first priority. The Group seeks to contribute to sustainable development. It works as closely as possible with host countries and communities, respecting their laws and customs and ensuring a fair share of benefits and opportunities. Views expressed in “Review” are not necessarily those of Rio Tinto. For convenience, the expression Rio Tinto is used to describe both Rio Tinto plc and Rio Tinto Limited and companies within the Group, even though these companies are generally separate and independently managed.

Review

Editorial office 2 Eastbourne Terrace London W2 6LG Telephone +44 02(0)7781 2000 Editors: Hugh Leggatt ([email protected]) Cherry DeGeer ([email protected]) with John Makin ([email protected]) Design and art direction: Lawrence Edwards Printed by Beacon Press using its environmental print technology. © Rio Tinto. Permission to reprint any article will usually be given on application to the editors.

Important information This publication includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this publication, including, without limitation, those regarding Rio Tinto’s financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to Rio Tinto’s products, production forecasts and mineral positions), are forward-looking statements. Forward-looking statements are based on numerous assumptions and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Rio Tinto, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

22862_IFC-p01

27/2/08

14:23

Page 61

Contents

4 8 13

Return to nickel In Indonesia and North America, working towards a market foothold for a metal increasingly in demand. By Ralph Mills.

Brave new world in London W2 Helen Plummer explores a new Rio Tinto regional centre.

One Rio Tinto With this issue, Review takes on a whole fresh appearance, adopting the Group’s new corporate identity and colours, and using a new range of specially designed typefaces. The new look is being introduced progressively during this year, providing instant recognition, under a single identity, of all the many businesses that belong to Rio Tinto around the world. We hope you like it.

Seven pillars of transformation David Bannister looks at how Richards Bay Minerals is responding as the winds of change re-shape South Africa’s industry.

+

Special supplement Introducing Rio Tinto Alcan.

16 21 22 A mountain to climb Statistically, the task looks truly awesome. And, Peter Brigg discovers, Eric Finlayson’s Exploration teams need to strike it rich to provide a flow of new projects for the Group.

At a moment in time Chris Morrissey shows how one publication enshrines the state of scientific knowledge, 250 years ago.

You write, we read Browsing through the editors’ postbag.

Rio Tinto

Review

22862_p04-07

22/2/08

13:55

Page 2

Rio Tinto’s interest in Sulawesi, a roughly star shaped island about the same size as the UK that lies to the east of Borneo, follows exploration work in the early 2000s that demonstrated the presence of a huge nickel deposit in the centre of the island, enough to support between 40 and 100 years of production. This project, together with another nickel project – Eagle, in the US – mark a return to nickel for Rio Tinto. Though in the past the company mined nickel in Brazil and Zimbabwe, the metal has not recently featured in its mining portfolio. But the ever increasing appetite for quality steels in China and other emerging economies will be ready to devour the output from both projects and transform Rio Tinto into a world leading nickel supplier. In Sulawesi, that same tropical rainfall that today can cause flooding, has, over eons, weathered the igneous rocks of the high plateau, both physically and chemically. The result is a mushy, waterlogged deposit called a laterite, and as the weathered rocks contained significant proportions of nickel, so does the laterite. Nickel has been mined from laterites, notably in nearby New Caledonia, since the late nineteenth century. However in the early twentieth century the discovery of vast nickel sulphide deposits at Sudbury, in Ontario, shifted the focus, and so, paradoxically, while laterites represent approximately 70 per cent of the world’s nickel resources, at present they form only about 40 per cent of nickel production.

In Indonesia and North America, working towards a market foothold for a metal increasingly in demand. By Ralph Mills.

Return to nickel In July 2007, torrential rain fell on the steep slopes of Morowali Province in central Sulawesi, Indonesia. The downpour resulted in floods and landslides that engulfed a number of villages, killing more than 50 people and forcing thousands to abandon devastated homes. It was a major disaster that was little reported in the West, but triggered an immediate reaction from Rio Tinto Indonesia. The company swiftly implemented a relief programme that, as well as providing immediate aid, gave damaged communities long term assistance.

4 Rio Tinto

Review

Nickel tolerant The natural presence of nickel-rich laterite produces a fairly barren landscape characterized by stunted rainforest and a nickel tolerant flora. Generally unsuitable for agriculture, the La Sampala area covered by the proposed Rio Tinto mining contract is sparsely populated and environmentally impoverished due to the naturally occurring exposure of nickel laterites. The initial exploration successes have been followed by a long and drawn out negotiation process. Contract discussions have been complicated by the location, which not only involves the national government but also straddles two regional administrations. Mike Jolley, president director of Rio Tinto Indonesia, explained that he and his team of negotiators are engaged in a race to complete Contract of Work agreements before new legislation is introduced. The proposed Sulawesi project, which because of the nature of the deposit will be a shallow open cut mining process,

22862_p04-07

22/2/08

13:55

Page 3

Return to nickel

with continuous rehabilitation, is planned initially to produce about 46,000 tonnes of nickel per annum, but with potential to increase to about 100,000 tonnes. The project will involve the construction of an access highway and a new seaport on the east coast of Sulawesi. “Local communities in Sulawesi and Indonesian national political parties are, naturally, excited by the economic potential of a Rio Tinto project,” said Mike Jolley. “However they might have become puzzled and not a little worried by a perceived lack of activity on the ground. To keep the project ‘alive’ in people’s minds, but without raising unrealistic expectations, Rio Tinto is committed to investing US$500,000 in a long term, broad based community development programme that is currently being planned and which will take place whatever the outcome of negotiations. “The Morowali disaster kick started this concept in a meaningful way, and we committed US$250,000 to providing relief in the areas affected by the flooding. We

. . . the ever increasing appetite for quality steels in China and other emerging economies will be ready to devour the output from both projects and transform Rio Tinto into a world leading nickel supplier.

which will re-house an entire village, involves the construction of 46 houses using traditional designs but modern materials and techniques. I’m pleased that both projects have been well received by local people and by local and national governments. “We consider the Sulawesi deposit to be one of the best undeveloped nickel resources in the world,” concluded Mike Jolley. “Once we have achieved a Contract of Work we can proceed with a feasibility study. The project is likely to involve capital costs of around US$2 billion, but will result in significant flow-through benefits to both the island and nation. It

will be the first time that nickel metal has been produced in Indonesia.” Forests and lakes For very different reasons, water is a hugely important issue in a mining project on the other side of the globe, in Marquette County, northern Michigan. On the south shore of Lake Superior, this is a gently rolling, densely forested, rocky environment dotted with lakes and laced with innumerable streams that tumble over waterfalls and feed rivers inhabited by game fish such as coaster brook trout. With moose, deer, wolves and black bears, it’s an environment about which

Devastation in Sulawesi. After torrential rains (above), Rio Tinto implemented a relief programme that provided immediate aid and shelter (left and below) as well as long term assistance.

began with an immediate contribution of food, medicines, clothing and temporary accommodation. Rio Tinto purchased the materials and arranged shipment to Sulawesi, where the aid was distributed by teams from Tadulako University, with whom we were already working closely on the mining project. “We then asked local communities and the university what we should do next, and together we created a scholarship programme that will ensure that the education of 50 children from flooded communities is not adversely affected. A second Rio Tinto funded project, again managed by Tadulako University, and

5 Rio Tinto

Review

22862_p04-07

22/2/08

13:55

Page 4

Because the mine will have such a small footprint, locals can continue to use the area for recreation, and after it is exhausted, nothing will remain on the surface. Above, Jon Cherry, the environmental engineer who heads the Eagle project. Left, spawning streams for coaster brook trout on the southern shores of Lake Superior are protected under the mine plan. Right, studying the hidden strata: geophysicist Emil Mateicivc (far right top) and geologist Andrew Ware (far right bottom), use seismic methods to build a profile of the mineralization below ground. After drill samples have been taken (below right), the holes are plugged with cement grouting (right).

people care very much, whether they live in its midst, or hunt, hike and fish amongst its watercourses and woodlands. Its rocks are ancient – the Porcupine Mountains are the oldest in the US – and below the surface in the sparsely populated Michegamme township, north west of Marquette city, lies a rich deposit of nickel sulphide – Eagle – discovered in 2002 by Rio Tinto. When I spoke to the Eagle project general manager Jon Cherry in December last year he was on tenterhooks, for later that day the Michigan Department of Environmental Quality (MDEQ) was due to give its final decision on crucial mine, air, and groundwater discharge permits. It was to be the climax of several years of

6 Rio Tinto

Review

effort that had resulted in an 8,000 page submission from the operating company, Kennecott Minerals. The MDEQ had also received 1,000 pages of submissions from local environmental organizations. If granted, Eagle’s permit would be the first issued by Michigan under its 2004 nonferrous metallic mine law, considered to be the most stringent in the US. Looking back on this hectic period, Jon Cherry said: “I think it demonstrates Kennecott’s concern for the environmental aspects of the project that instead of following tradition and appointing a mining engineer to plan the mine, they appointed me – an environmental engineer.” Environmentalists had argued that the

mine would endanger nearby watercourses, asserting that “no sulphide mine is ever safe”. “We can easily demonstrate that that isn’t so,” said Jon Cherry. “Over the border in Wisconsin, Kennecott operated the 180 acre Flambeau copper mine right next to the Flambeau River for five years without a single environmental incident. That mine has now been closed for ten years without any further incident, and we’ve just received a Certificate of Completion, which means that we’ve fulfilled all our obligations and have been refunded 80 per cent of our bond, the largest amount allowed.” The orebody at Eagle is approximately 300m from top to bottom, and Jon Cherry

22862_p04-07

22/2/08

13:56

Page 5

Return to nickel

explained that it will be mined underground using long hole stoping, a process that involves infilling excavated chambers with cement and waste rock as mining proceeds, starting at the bottom of the orebody. No waste rock will be left at the surface after closure, as it will all be consumed during the backfill process. The orebody will be reached by a long inclined tunnel that will minimize any risk of interference with the nearby watercourses. Extracted nickel ore will be shipped to a local mill and then, in concentrated form, to Canada for smelting and refining. Because the mine will have such a small footprint, locals can continue to use the area for recreation, and after it is exhausted, nothing will remain on the surface. Jon chuckled as he explained that the treated water from the mine will have to be stored in holding tanks to prevent the entry of rainwater before it is released into the environment. “My treated water is allowed to contain only two nanograms of mercury per litre – that's parts per trillion – but Michigan rainfall already contains 20 nanograms of mercury per

litre – I can’t let them mix! The treated water will be of better than drinking water quality.” Ironically, Eagle’s engineering challenges are relatively simple from a mining point of view, but complex environmental issues have meant that Jon Cherry has spent a lot of time and effort liaising with local communities and organizations. “It’s been important to us that we’ve listened to and addressed people’s concerns, and we will continue our efforts to engage with residents as the project moves forward. “From a personal perspective I’ve been involved with environmental issues for the last 18 years. In my previous roles my job involved the remediation of environmental legacy issues at existing mines. Eagle was an opportunity to take on the design of a greenfield project and to do it right from the outset, using what we have learned from the past. It was an opportunity I couldn’t pass up.” Later that day the Michigan Department of Environmental Quality issued the three permits for which Jon had been waiting. His reaction: “This is good news not only for Kennecott, but

Not just for nickelodeons Nickel is almost always used in alloys with other metals, the most familiar of which is stainless steel. While its most dramatic uses include replacement joints, surgical instruments and heart stints, it has many more run of the mill applications in pots and pans, in aeronautics, in motor vehicles and computers, and in hydrogen fuel cells. Alongside the five cent US “nickel” coin, the metal is also used in other coinage, including the Euro.

also for job creation, building a stronger economy, and providing additional opportunities for area businesses to grow. We are very pleased that our efforts over the last several years to work with regulators and many parties in the community to develop a good, environmentally responsible project have been realised. We look forward to getting the project under way.” Commenting that the public involvement had been a positive factor and had helped his organization “beef up” some aspects of the permits, an MDEQ spokesman pointed out that: “The reality is that this review process is one of the most rigorous that’s ever been done probably in any state in the nation for a project like this.” Rio Tinto will invest some US$300m in the Eagle mine, which will become the only primary nickel mine operating in the US. Construction work will begin this year, with ore production starting in 2009. The mine is targeted to produce about 16,000 tonnes of nickel per year for seven years. When he heard that the permits had been granted, Bret Clayton, Rio Tinto’s chief executive, Copper, commented: “Eagle gives Rio Tinto a valuable opportunity to enter the market for nickel, demand for which is rising strongly led by the development of new infrastructure in developing economies. “In ten years’ time, Rio Tinto could rank among the top nickel producers globally.”

Ralph Mills is a writer and archaeologist based in Nottingham, England. For an absorbing depiction of life in Upper Michigan where the Eagle project is located, see the crime novels of Henry Kisor – especially “Venture into murder” which includes some interesting mining background alongside seedy goings on at a disused copper mine.

7 Rio Tinto

Review

22862_p08-12

22/2/08

14:01

Page 2

Brave new world

in London W2 Helen Plummer explores a new Rio Tinto regional centre.

8 Rio Tinto

Review

22862_p08-12

22/2/08

14:01

Page 3

Brave new world in London W2

Walk through the glass doors of No. 2 Eastbourne Terrace, London W2 and you are entering the bricks and mortar embodiment of a new brand and working ethos for the global business. Significantly, the airy ground floor reception area – and every floor of the detached corner site building – is transparent, with floor to ceiling windows flanked by thin strips of pure white carera limestone and aluminium. Frequent visitors to the organization will not fail to notice the contrast with the rather more opaque, somewhat inscrutable, exterior of the Group’s former long term London home, 6 St James’s Square. Left behind is the dark wood panelling and imposing formality of the entrance hall to No. 6. Instead, white flooring and natural light provide emphasis for the polished aluminium blades which rise up at angles from the floor all over the double height foyer and provide anchorage for suspended glass boxes of artfully lit mineral samples. On the far walls, contrasting geometric strata panels represent different metals – copper, zinc, iron. The effect is dramatic and contemporary, spelling out the message that this office houses a thoroughly modern mining company. Here, the visitor is greeted by the smell of freshly ground coffee and a sleek low level reception desk, set back from the entrance. The impact is of a professional but unimposing welcome, with an array of reception, work and social facilities. To the right is a circular arrangement of computer terminals that resembles the control panel of Dr Who’s tardis, where the first time guest is asked to run through an audio visual presentation on site health, safety and etiquette. Over on the other side, relax with a complimentary cappuccino from the foyer’s high street style coffee shop on an inviting mix of seating; choose from stylish easy chairs in white leather or noodle bar type benches and tables. Or settle in to the red wifi visitors’ station – arrive early for your meeting, plug in and check on your emails. This is Rio Tinto’s Paddington Regional

Centre, the Group’s new European base, and workplace for 550 people brought together under one roof from St James’s, and offices in Chiswick, Guildford and Bristol. The “brave new world” description is that of Neil Usher, general manager – Group Property. “We wanted this to be a building that speaks to you, that is lively and buzzy,” he says. “St James’s was a very traditional office, a corporate statement. This move has allowed us to create a much more accessible working environment that encourages fully collaborative working and reflects the new Rio Tinto brand.” Gone are the hushed corridors, individual offices and intimidating closed doors of St James’s. Pass from reception to the core of the building here in Paddington and you are thrust into a bustling, animated environment. Each floor is completely open. Workstations – not in rows, but with layouts that allow for both collaborative and individual working – are grouped together, with no apparent delineation of status. These are punctuated by curved wall meeting “capsules”, designed for either one on one discussions, or individual “telebooths”, for confidential phone calls or quiet work times. To avoid “camping out” in these rooms, which are not bookable and available on a spontaneous “drop in” basis, there is no power source – so an individual can only work in there for as long as the battery on his or her phone and laptop will last. The open staircase (there are lifts, but all are encouraged to use the stairs as much as possible) passes through the “mix area” of each floor. It is in these sections, each kitted out with a contemporary look kitchen area and café style tables, where staff can prepare drinks, catch up on newspapers and professional journals, monitor the fortunes of the FTSE on the plasma screen, or hold informal meetings or discussions with colleagues. Outdoor work And, British climate permitting, the building offers Rio Tinto people with something quite unusual for central London — outdoor work space. Three of the floors open out onto large, curved terraces, attractively landscaped with ornamental grasses, sustainable wooden seating and tables. There are also bigger, enclosed areas for “meet ins” (internal meetings), “meet outs” (external meetings) and brainstorming (write-on white walls, bar stools and easy chairs). Even the reception area and the restaurant on the sixth floor can be used as venues for informal meetings.

9 Rio Tinto

Review

22862_p08-12

22/2/08

14:01

Page 4

Brave new world in London W2

Everyone based in the building has a designated desk, but the idea is that anyone can work anywhere in the building. Wifi access is everywhere, even on the outdoor terraces. Workstations are entirely flexible, deliberately so.

“We have at least ten different types of work space in the building,” explains Neil Usher. “We wanted the environment to be as flexible as possible, to allow collaborative working and greater communication, whilst accommodating the need to be able to work quietly and confidentially as well. People may choose to move between different work spaces according to the type of work they are doing at any one time.” Occupying a corner site and being entirely detached, 2 Eastbourne Terrace is roughly square shaped, but with five rounded corners. The impact of this on the interior, coupled with the layout, and curved walls of the capsules and pods, is that it feels like a circular space. This is something which Neil believes encourages “energy flow”. “Introduce straight lines and you lose energy,” he

10 Rio Tinto

Review

says. “And this way, we’ve avoided having any corridors, circulation space is integral.” Circulation space is vital to the new business culture; no one should feel chained to their desk. It is intentional too that the staircase is not tucked away to one side, but that it threads through the hub of the working areas, encouraging people to meet in passing, to integrate, communicate, collaborate. It’s what’s known in the trade as “forced collision”. Graphic reminder Interior curved walls, stairwells and meeting areas are decorated with giant, dramatic images of Rio Tinto locations and products, printed directly onto the wall in vinyl for durability. There’s no corporate art collection here, rather a “graphic reminder of who we are”,

according to Neil. And with a number of previously dispersed functions coming together in one location, he believes that it will bring people closer to the core businesses. “It won’t be unusual here, for example, to bump into a geologist brandishing a mineral sample,” he says. Everyone based in the building has a designated workstation, but the idea is that anyone can work anywhere in the building. Wifi access is everywhere, even on the outdoor terraces. Workstations are entirely flexible, deliberately so. All employees have laptops, which slide on to a pedestal-mounted dock below the desk top. Phones, also on a mounted shelf above the desk, are on a “follow me” system – work in any area of the building: log in and the phone in front of you becomes yours. Coats and jackets are hung in central cupboards, not slung on

22862_p08-12

22/2/08

14:02

Page 5

Brave new world in London W2

Aldermanbury Square The new working environment of the Paddington regional centre is mirrored in microcosm by Rio Tinto’s corporate office at 5 Aldermanbury Square in the City of London, whence a lean team of 50 people who work on corporate development and strategy relocated late last year. This 1,450sq.m space is on the twelfth floor of a brand new landmark development and offers all the same workplace amenities, including a small restaurant and a range of meeting and support areas. “The office at Aldermanbury Square will provide a first class platform for our interface with the financial community and excellent facilities for engaging with visiting stakeholders,” said chief executive Tom Albanese of the move.

have been issued with the OneCard, which besides its function as a security pass and eligibility for lunch in the in house restaurant, acts as a licence to use the shared multifunctional devices for all print, copy, scanning and fax needs. Once you’ve pressed “print” on your laptop, you need to visit the nearest printer to use your OneCard and release the paperwork. Anything not printed out by midnight that day is automatically cancelled – doing away with those piles of documents that often languish uncollected in the printer tray. High speed quality scanners are available in all the central resource areas to help keep paper to a minimum. Photocopiers are set by default to black and white. the backs of chairs; desks are cleared at the end of every day, with papers locked away in pedestal units and filing cabinets. The only items left out are keyboard, monitor, mouse and phone. The aim is not to create some sort of “Big Brother” style regime, but to preserve confidentiality at unattended workstations and to ensure usable spare desks are available for visitors. Reactions to working in this way have been, so far, highly positive. People in the building have embraced the new culture readily and proved their adaptability. For the switchover from St James’s Square in December, packing took place on a Friday before the weekend move; by 12 noon on the Monday every crate was unpacked and work had resumed. The speed of the operation was undoubtedly facilitated by a nine month

campaign led by Rio Tinto’s relocation team before the move to reduce the amount of paper used and stored by the Group. Swathes of paper based material were reviewed. Required data was stored electronically before the paper itself was recycled. All were encouraged to think digitally wherever possible and change habits where paper use was concerned. The aim in the new workplace is for at least a 25 to 30 per cent reduction in paper use. There are no waste bins by workstations; staff take all material to colour coded recycling bins (confidential paper; dry recycling including bottles, cans and plastic; wet waste) in the mix areas. The idea behind this is that if you have to dump waste elsewhere, you will think twice before generating it in the first place. All those who work in the building

Saving paper Nowhere was the drive to reduce paper more key than in the new Information and Resource Centre, a phone free haven on the lower ground floor, where the original five libraries spread across the Bristol, Guildford and St James’s offices have come together – a Herculean task that involved reducing over 1,000 linear metres of reference material by over half. Now available to all UK employees, who can chose to work inside, or outside in its landscaped patio area, this is the central resource for publications and subscriptions in the region, thus consolidating costs and cutting the numbers of journals imported to the organization. “The new building has given us the chance to challenge everything,” says Sean Jones, Facilities manager. “We’ve

11 Rio Tinto

Review

22862_p08-12

22/2/08

14:02

Page 6

Brave new world in London W2

looked at every aspect of office life and rethought the environmental impact of what we do.” This really does mean everything: stationery, 63 per cent of which is now from recycled materials; corn starch coffee cups; the eco friendly range of cleaning products used by the contract cleaners; desk chairs and flooring, made almost entirely from recycled matter. All unwanted furniture and equipment from the old offices was either dispatched for use in other Group locations or sent to Greenworks, an organization which recycles or resells ex-office furniture. Nothing went to landfill. Take lunch in the Clove restaurant on the building’s top floor, a chic, light filled space with views over the London skyline and the option of an outdoor terrace, and you could be forgiven for thinking you’d wandered into some smart West End eatery. On the menu here are healthy, plated hot meals and sandwiches made as far as possible from locally sourced products, with “food miles” kept to a minimum. Transport links Since transport links for the premises are second to none – it’s a stone’s throw from Paddington railway station, with its Underground and bus connections, all are encouraged to use public transport to travel to and from work or between meetings. It goes without saying that the workplace is fully geared up with state of the art video conferencing, thus reducing the requirement for air travel, but there will inevitably still be some need for overseas traffic. Rio Tinto visitors landing at Heathrow can hop on the Heathrow Express, which runs to and from Paddington station. Those who arrive long haul, jaded and jet lagged in the early hours, can check into one of the building’s two guest suites, open between 5am and 11am and equipped as well as any hotel room, to catch up on some sleep and take a shower before meetings. “We’ve taken a holistic approach,” adds Sean Jones. “It’s no good having an office built and running to the highest of environmental standards, if the people in it are not operating in that way too.” The building itself fulfils the most stringent of environmental criteria. “We’ve got very advanced building management systems,” explains Neil Usher, “making the office as efficient as possible in terms of heating and cooling. There are intelligent lighting systems, so that lights do not stay on when there is no need for them, energy efficient bulbs and presence detectors on all the taps.”

12 Rio Tinto

Review

Clove It’s one of the first things visitors to the Paddington Regional Centre will notice – a 7m high abstract sculpture, loosely based on a tree. The work of sculptor Bryan Kneale, “Clove” stands outside the building in a paved area to the east, flanked by live topiary. The choice of materials, stainless steel in a combination of highly polished and matt satin finishes supported by a copper “trunk”, is clearly no coincidence. All new buildings in London are obliged to display a piece of public art, but the developer’s original proposal of two glass statues to be erected in the entrance did not accurately reflect Rio Tinto’s business, so the Group commissioned its own work. Neil Usher explains, “We wanted a landmark that would be seen as a valuable addition to public art in the capital and would demonstrate our appreciation of contemporary British sculpture.” Its title has lent a brand name to the building’s Clove coffee bar and restaurant.

Despite the limited availability of renewable energy on a commercial scale, the building’s electricity is entirely supplied by the energy company Npower from renewable sources – wind power, along with other means including the cofiring of biomass and hydropower. Energy efficient Russell Durling of the building’s original developer, Derwent London, explains that the mix of stone and glass that graces the exterior is carefully designed to follow the path of the sun. “Because of the structure’s prominent corner plot position,” he says, “we designed it so that it is about 40 per cent solid and the patterning of stone versus glass varies across the structure to mask the sun where it is at its highest in mid summer. This means less solar gain and is more energy efficient.” Down in the engine rooms of the building is Sean Jones’ pride and joy – a rainwater harvester tank. Water collected from the roof is used to flush the building’s toilets. As far as Sean knows, there is only one other such in a commercial property in central London – at the O2, the former Millennium Dome. Sean also has high hopes – yet to be realized – of installing a wormery for organic waste from the restaurant. All this adds up to the high rating of four out of five on the BREEAM scale – an environmental assessment method that can be applied to new and existing buildings. “It’s pretty much as good as you can get in central London,” explains Neil. “If we were on a greenfield site, then we might have been able to achieve an ‘excellent’ rating, that is five out of five, but there are some limitations imposed by our location – it’s just not practical to have a bio-mass fuel boiler in central London, for example. Getting a ‘very good’ ranking is quite an achievement.” It’s one of many achievements chalked up at the Paddington Regional Centre, but no one is resting on their laurels. With this site and the new corporate office at Aldermanbury Square in the City of London up and running, there is now a blueprint for other new Rio Tinto regional centres around the world – Brisbane, Perth, Salt Lake City, Montreal and possibly other locations will all follow this model. “Paddington has set a global workplace standard and established a very different business environment,” says Neil. “This is the first in our global ‘brave new world’.”

Helen Plummer is a freelance writer based in Oxfordshire, England.

22862_Cover Supplement

22/2/08

14:18

Page 7

Profile

Supplement to Review magazine March 2008

Rio Tinto Alcan: we have lift off!

22862_IFC-p01 Supplement

27/2/08

16:52

Page 6

Rio Tinto Alcan: we have lift off!

Tom Albanese, Rio Tinto’s chief executive, welcomes you aboard for this special supplement

Front cover: aircraft wing built at Alcan’s Issoire plant in France. Back cover: the new power station completed at the Weipa mine in Queensland.

Welcome to this special supplement of Review, covering our much enlarged aluminium product group, Rio Tinto Alcan. Shortly after Rio Tinto’s acquisition of Alcan was completed last October, Dick Evans, the chief executive of Rio Tinto Alcan who is interviewed on pages 8-13, took me on a visit to Alcan’s operational heartland north of Montreal in Canada. I was really impressed. The Saguenay-LacSt-Jean region is an area with a catchment basin the size of Switzerland. Its network of fast flowing rivers and man made lakes feeds into a hydroelectric system of six power stations whose maximum production capacity reaches more than 2,680 megawatts of clean electricity. This sustainable power source is the key to low cost production at four aluminium

Profile

Rio Tinto Review Editorial office 2 Eastbourne Terrace London W2 6LG Telephone +44 02(0)7781 2000 Editors: Hugh Leggatt ([email protected]) Cherry DeGeer ([email protected]) with John Makin ([email protected]) Design and art direction: Lawrence Edwards Printed by Beacon Press using its environmental print technology. © Rio Tinto. Permission to reprint any article will usually be given on application to the editors.

smelters clustered within easy reach of tidewater on the St Lawrence seaway. The region represents an industrial complex that cannot be duplicated and something which in anyone’s definition makes it a first tier set of assets in the aluminium industry today. And this is just part of Rio Tinto Alcan’s strong set of aluminium assets. The integration with Alcan is going well. It adds five bauxite deposits, five alumina refineries, 22 aluminium smelters, and 12 power generating facilities to Rio Tinto’s complement of one mine, two alumina plants, four smelters and one power facility. We are now confident in raising our target of achieving synergies of US$940m a year in operating cost savings, starting with the full year 2009. Besides giving you an in depth overview of the largest and most exciting expansion of Rio Tinto’s asset portfolio to date, this supplement highlights opportunities created by bringing Alcan into the Rio Tinto Group and the potential for continued strong growth in the aluminium sector. In the following pages our writers give you a profile of the original Alcan, its successor Rio Tinto Alcan, an overview of the mineral resources that underpin our production of aluminium, the advanced technology involved in producing it, and a gallery of pictures of the operations that now form part of Rio Tinto’s global outlook. We hope you enjoy this first class seat for your visit to the new Rio Tinto Alcan.

Important information This publication includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this publication, including, without limitation, those regarding Rio Tinto’s financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to Rio Tinto’s products, production forecasts and mineral positions), are forward-looking statements. Forward-looking statements are based on numerous assumptions and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Rio Tinto, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

22862_IFC-p01 Supplement

22/2/08

15:51

Page 61

Contents

4 8 14

Come fly with us Hugh Leggatt is tour leader, explaining how Rio Tinto Alcan pushes out the Group’s boundaries around the globe.

Meet the skipper Peter Brigg talks to Dick Evans, the man who heads Rio Tinto Alcan, now the world’s biggest aluminium business.

Down to earth Chris Morrissey focuses on bauxite, the underlying compound from which aluminium is derived.

18 21 Reach for the sky Julian Cribb reports on how the formation of Rio Tinto Alcan has united the world’s top metallurgical R&D teams in a worldwide drive to make aluminium the twenty first century’s greenest metal.

Bird’s eye view Stepping back to look across the years is Mike Reilly, reflecting on over a century of Alcan history.

Rio Tinto Alcan

Profile

22862_p04-07 Supplement

27/2/08

15:14

Page 2

COME FLY WITH US Hugh Leggatt is tour leader, explaining how Rio Tinto Alcan pushes out the Group’s boundaries around the globe. Rio Tinto acquired Alcan Inc on 23 October, 2007, in the biggest mining industry transaction so far, forming a combined aluminium business now known as Rio Tinto Alcan, one of Rio Tinto’s five product groups. Rio Tinto Alcan comprises a set of high quality, integrated aluminium businesses with a global reach encompassing every continent. On a world map showing Rio Tinto’s operating locations, Rio Tinto Alcan brings more dots clustered in eastern Canada, more mines and smelters in the UK, Europe and Africa. From north and south, Iceland and eastern Brazil join the line up, and Rio Tinto has its first operation in China, a smelter in Qingtongxia. Rio Tinto Alcan comprises 25 aluminium smelters in 13 territories (including joint ventures), largely in OECD countries. Crucially, the production base contains many of the world’s most modern and low cost smelters, fitted out with Rio Tinto Alcan’s industry-leading AP (Aluminium Pechiney) Series technology. In terms of production, Rio Tinto Alcan is number one globally in the raw material bauxite (capacity 34.8 million tonnes per year) and aluminium (capacity 4.1 million tonnes per year). In alumina – the intermediate product refined from bauxite and smelted into aluminium –

4 Rio Tinto Alcan

Profile

Rio Tinto (US$12.6bn)

Rio Tinto & Alcan (US$6.5bn)

Copper 40%

Copper 30%

Aluminium 10%

Downstream Aluminium 7%

Iron Ore 30%

Upstream Aluminium 25%

Iron Ore 23% Energy 11% Diamonds and Minerals 9%

Rio Tinto (US$23.4bn) Canada 13%

Energy 8% Diamonds and Minerals 7%

Rio Tinto & Alcan (US$44.1bn) Other 4%

Other 6% Europe 14%

Australia/NZ 58%

Canada 26% US 16%

US 23%

Rio Tinto Alcan is number four globally with a capacity of 9.1 million tonnes per annum. With expansions in alumina production under way, Rio Tinto is expected to become the leader in this commodity as well. There are plans to double current alumina production by 2015. Rio Tinto Alcan is also a leader in aluminium industry technology which, combined with access to large and sustainable hydroelectric generating capacity, constitutes a significant competitive advantage of increasing value in a world in which carbon emissions are expected to be constrained to combat global warming. The combined group also has a strong project development portfolio with six

Notes to the charts Product analysis: Rio Tinto 2006 EBITDA includes Rio Tinto’s share of equity accounted units. Rio Tinto 2006 audited IFRS financials from 2006 annual report. Alcan 2006 audited US GAAP financials from 2006 10K. Rio Tinto has not assessed the potential impact of adjusting accounting policies of Alcan to those of Rio Tinto. (a) Alcan upstream EBITDA calculated as total Alcan EBITDA less Alcan Packaging and Engineered Products Business Group Profit. Source: Company information.

Australia/NZ 40%

projects planned or under way in bauxite and alumina and eight more in aluminium. Smelter upgrades are planned in Quebec and British Columbia, Canada. In addition, new greenfield developments are at various stages in South Africa, Oman, Abu Dhabi, Malaysia and Saudi Arabia. Rio Tinto Alcan is currently organized into four business units: Bauxite & Alumina based in Brisbane, Australia; Primary Metal based in Montreal, Canada; and Engineered Products and Packaging, both based in Paris, France. At the time of the acquisition, Alcan had announced plans to divest the Packaging division. Subsequently, Rio Tinto said it would explore divestment of Engineered Products to focus on upstream mining

Geographic analysis: Rio Tinto based on IFRS. Alcan based on US GAAP. Rio Tinto has not assessed the potential impact of adjusting accounting policies of Alcan to those of Rio Tinto. Alcan packaging and engineered products divisions represent 14% of total assets shown and are broken down: 59% Europe, 26% US 4% Canada, 10% other. (a) Rio Tinto based on PP&E, intangible assets and goodwill at 31 Dec. 2006, as provided by Rio Tinto. (b) Alcan assets based on Gross PP&E as of 31 Dec. 2006 (c) Other includes South America, Africa, Asia and other Pacific, and all other.

22862_p04-07 Supplement

22/2/08

15:42

Page 3

A thoroughly modern metal Aluminium is a modern metal and one of the most versatile and thus in demand from all quarters. Almost every aluminium product can be profitably recycled repeatedly without loss of metal quality. Recycling aluminium uses only five per cent of the energy needed to produce the primary metal from bauxite. Its light weight and strength make it ideal for automobile engines and bodywork, as well as shipbuilding and aircraft manufacture. In the home the non corrosive properties and ductility of aluminium make it ideal for doors, window frames, roofing and insulation. It makes convenient packaging material as aluminium foil, drink cans and wrap. Because it is a good conductor of electricity, aluminium is used in the manufacture of electrical wire and transmission cable.

5 Rio Tinto Alcan

Profile

22862_p04-07 Supplement

22/2/08

15:42

6 Rio Tinto Alcan

Profile

Page 4

22862_p04-07 Supplement

28/2/08

15:00

Page 5

Come fly with us

and processing activities. The combined aluminium business is expected to yield US$940m a year in operating synergies. For example, in Australia complementary assets are being combined, such as the giant Weipa/Ely and Gove bauxite deposits located on the Gulf of Carpentaria, aligned with processing facilities in Gladstone, Queensland. The alumina refinery at Gove in Northern Australia is currently powered by fuel oil. Leveraging Rio Tinto’s experience at Yarwun in Gladstone, where a gas fired cogeneration facility will be installed in the expanded refinery under construction, Gove could be converted to an alternative energy source. Gove has limited reserves; however, Weipa bauxite could eventually be processed by the refinery which could lengthen its operating life. The concentration of three alumina refineries in north east Australia presents significant procurement opportunities for such raw materials as caustic soda. There are also savings available globally in research and development, procurement, financial and fiscal integration and typical corporate and other overheads. Global aluminium demand is growing strongly, at an expected rate of five to six per cent each year to 2011. In 2007 it increased by ten per cent, its fastest rate in recent history, with China accounting for most of the growth. Besides strong Chinese consumption, increased marginal costs of Chinese supply will continue to support prices.

Hugh Leggatt is one of “Review” magazine’s senior editors, and principal adviser, Editorial, Rio Tinto Communications & External Relations, based in London.

The team leaders In October last year, Rio Tinto Alcan appointed its senior management team when the product group was formed. The leaders of its business units were named as: Steve Hodgson (formerly Rio Tinto Aluminium): president and chief executive officer, Bauxite & Alumina, with responsibility for bauxite mines, alumina refineries and specialty alumina businesses worldwide, headquartered in Brisbane. Jacynthe Côté (formerly Alcan): president and chief executive officer, Primary Metal, with responsibility for all primary metal facilities and power generation installations worldwide, headquartered in Montreal. Christel Bories (formerly Alcan): president and chief executive officer, Engineered Products (to be divested). The headquarters are in Paris, France. Packaging (to be divested) is led by Ilene Gordon (formerly Alcan) as president and chief executive officer, headquartered in Paris, France. Executive staff functions are led by: Phillip Strachan (formerly Rio Tinto Aluminium), Finance, also responsible for Business Planning and Analysis, Information Systems & Technology, and Business Improvement, as well as being co-leader of the Rio Tinto Alcan integration team with JeanChristophe Deslarzes (formerly Alcan) in Human Resources, who is also responsible for Health, Safety and Environment (HSE). As senior vice president, Business Development, Sandeep Biswas (formerly Rio Tinto) is responsible for business development in the upstream business units, technology sales, growth, and product group strategic alliances and investments. Corey Copeland (formerly Alcan), Communications & External Relations, will also be responsible for Government Relations and Sustainable Development. Pierre Chenard (formerly Alcan) leads the legal function as vice president and senior counsel. Oscar Groeneveld, who was previously chief executive of Rio Tinto Aluminium in Brisbane, is leaving the role after being an adviser on integration through the transition period.

7 Rio Tinto Alcan

Profile

22862_p08-13 Supplement

22/2/08

15:52

Page 2

MEET THE SKIPPER Peter Brigg talks to Dick Evans, the man who heads Rio Tinto Alcan, now the world’s biggest aluminium business.

Born and raised on a cattle ranch in Oregon, Dick Evans might easily have become a cowboy. With his tall, rangy frame and Lee Van Cleef moustache he would certainly have looked the part roping steers and riding herd. But instead he elected to follow a very different career path, taking an engineering degree and then joining the aluminium industry. Now, after nearly 40 years in the business, Evans finds himself heading Rio Tinto Alcan, the world’s biggest aluminium business. The period leading up to and immediately following the completion of Rio Tinto’s acquisition of Alcan in November was a particularly demanding time for Alcan’s former CEO, but the months ahead look no less challenging, as he plans and implements the integration of the two companies’ aluminium interests. The integration process is not an activity Evans comes to as a stranger. In his days at Alcan he was responsible for overseeing the merging of the company with the Swiss based Algroup, acquired in 2000, and then, in 2003, for Alcan’s acquisition of the French company Pechiney, the world’s fourth largest producer of aluminium products. Even before the ink was dry on the Rio Tinto deal, Evans was shuttling between the various plants in the expanded Aluminium group, familiarizing himself with Rio Tinto’s facilities and meeting the people who would help form his new team. Likewise, Rio Tinto people have been getting to know their new Alcan colleagues, with teams of six to eight people from both sides visiting each smelter and refinery, exchanging ideas and discussing best practice. There has already been a lot of movement between Montreal and Brisbane, in both directions, and Evans expects this cross fertilization to continue and intensify. “I have become a great believer in the people side of management,” he avers. “In my early days as a manager, my approach probably echoed my training as an engineer – it tended to be analytical and numbers oriented. Over the years, though, my management style has evolved and mellowed. Nowadays I’m much more informal, participative and, I hope, ‘transparent’. “When I say ‘My door is always open’ I really mean it. I welcome people stopping by to give me the benefit of their thinking, regardless of their position in the organization. And, thanks to email, employees now have access to the chief executive no matter where they may be in the world.” Evans explains that to help him direct the merging of the two companies’ aluminium interests he has set up a top level integration office, composed of one senior executive from Rio Tinto and one from Alcan. This office oversees the activities of as many as 40-50 teams made up of talented experts from both sides, and there are seven or eight broader teams with the balance being more specialized. “Each team has been charged with looking at a particular aspect that we need to get right in order to make the integration successful,” he says. “For example, there’s a bauxite-alumina team and a smelting team. And we have a finance team, a technology team, a business resources team – then within each broad team there are special teams. “Basically, all of them have two main tasks. The first is to develop a transition plan that will bring the two organizations together successfully. This covers everything from making sure that the two email systems hook up correctly to being clear about who’s calling on customers. They’re looking at the organizational

. . . first is to develop a transition plan that will bring the two organizations together successfully.

8 Rio Tinto Alcan

Profile

22862_p08-13 Supplement

22/2/08

15:53

Page 3

Meet the skipper

structure and how it should be staffed and at how we close the books. Really, all the basics of running the business, making sure we have a slick, smooth running operation from day one. “Their second task is to identify the synergies that can be harvested from the merger. Before the deal went through, Rio Tinto estimated that some US$600m a year of benefits would be achievable. Now that all the books are open and we’ve been able to take a closer look, we think that figure will be at least 50 per cent better. In other words, well over US$900m after tax should be possible, perhaps more. So there’s a huge prize to be won and the integration teams have the job of making sure we claim it.” Dick Evans speaks interestingly about the similarities, and the differences, between Rio Tinto and Alcan. “Seen at a high level, the culture in the two companies is very similar,” he says. “Both set high standards in terms of their values, ethics and code of conduct. Both strive to be leaders globally in sustainable development and business practices. Both have excellent reputations and over the past few years have worked hard to enhance their performance.” Such differences as there are, says Evans, stem from the two companies’ distinctly different roots. “Rio Tinto’s corporate culture owes much to the company’s origins as a mining company, whereas the aluminium business is more of a high tech processing industry. You have only to look at the exploration function to see the truth of this. Rio Tinto has about 950 people on the exploration side. In Alcan we had five. Conversely, Alcan had well over 1,000 people involved in processing technology; Rio Tinto has far, far fewer.” Evans also points to the aluminium industry’s heavy dependence on electricity. “At Alcan we generate more than half of our electricity needs, often operating where there are trapped ‘pockets’ of electricity – places like Iceland, which is rich in hydro and geothermal energy but, because it’s stuck in the middle of the North Atlantic, can’t export the electricity directly. So it imports alumina and exports finished aluminium. In fact you can think of aluminium as solidified electricity.” In amalgamating the Rio Tinto and Alcan aluminium businesses there have been few, if any, surprises. “Huge though the aluminium industry is in terms of capital invested and volumes mined and processed, it is dominated by a relatively small number of players,” Evans says. “When you’ve spent a lifetime in the business, as I have, you get to know not only your competitors’ physical assets but the people too. “And at Alcan we had especially close links with Rio Tinto, both through our sale to them of our smelting technology and also through our joint ownership of Queensland Alumina in Australia. Not only that, I spent 27 years with Kaiser Aluminum, which was the original co-owner of Comalco with Rio Tinto, so I was already familiar with many of Rio Tinto’s aluminium assets. “All this makes bringing the two aluminium businesses together easier than you might think – though that, of course, is not to minimize the many hurdles we have to get over.” Hurdles, however, have never been a problem for Dick Evans. In his younger days he was for several years ranked in the top 20 nationally in the 400 metre hurdles and attended college on a sports scholarship. “I’ve always been keen on sport,” he says. “I played a lot of

. . . second is to identify the synergies that can be harvested from the merger. . . there’s a huge prize to be won!

9 Rio Tinto Alcan

Profile

22862_p08-13 Supplement

22/2/08

15:53

Page 4

Meet the skipper

basketball and tennis at college and over the years I have enjoyed playing squash and golf at a fairly competitive level. Nowadays, I don’t have as much time as I’d like for those two games and I mainly get my exercise through cycling and walking.” In such leisure time as he does get, Evans enjoys fly fishing and at one time he held the world record for the largest Dolly Varden trout ever landed (19lb 8oz). He is also something of a collector – of antique prints and also of archaeological artefacts such as arrowheads. In the last five years he has rekindled his interest in photography. “My work takes me to some fabulous places for outdoor photography,” he says. “Brazil, Australia, Iceland, Oman and Africa, for example. So my camera is never far from my side and I hope soon to publish a book of my work.” Looking back on his career to date, Evans has particularly good memories of the four years he and his wife, Gretchen, and their two daughters spent in Ghana in the late seventies and early eighties. It was, he says, quite a contrast going directly from the rarefied academic atmosphere of Stanford Graduate Business School in California, where he had just taken a masters degree, to undertaking his first line management job with Kaiser Aluminum, running a large smelter in the steamy heat of West Africa. “These were troubled times in Ghana,” he recalls. “We saw three military coups during our time there. And the smelter was beset by a host of problems – power outages, maintenance and security problems, high expatriate turnover – in fact just about every operating problem you can think of. On top of that, there was intense political pressure to push ahead with the programme of advancing Ghana nationals within the management structure. “But it was a fantastic experience and I learned one thing in Ghana which has been important throughout my career: namely that in developing countries you can establish world class operations without compromising your standards. If you set a leadership example, people will follow – in some cases better than in the developed countries. In Ghana we took the most troubled plant in the Kaiser Aluminum smelting system from bottom of the heap to ‘Best in Class’ – best not just on operating efficiency but best on safety too.” In fact, so highly regarded was Dick Evans by the Ghanaians that they twice made him an honorary tribal chief – once when he left the country in 1982, and again in 2005. Evans resigned from Kaiser in 1996 because he was convinced the company was on the wrong course financially after a highly leveraged buy out: he thought that sooner or later it would go belly up. And so it proved when Kaiser eventually went into bankruptcy

. . . you can establish world class operations without compromising your standards. If you set a leadership example, people will follow . . .

10 Rio Tinto Alcan

Profile

Operations in progress at the Alma Works, Quebec, Canada, pictured above from the air. The potroom (right) is where the aluminium is produced.

22862_p08-13 Supplement

22/2/08

15:53

Page 5

An integrated production chain for aluminium With five bauxite deposits, five alumina refineries, 22 aluminium smelters and 12 power generating facilities added to Rio Tinto’s complement of one mine, two alumina plants, four smelters and one power station, Rio Tinto Alcan is the world’s largest producer of bauxite and aluminium. It plans to expand its refineries to become number one in alumina production as well.

11 Rio Tinto Alcan

Profile

22862_p08-13 Supplement

22/2/08

15:53

Page 6

Above, cable storage, Lapointe Works, Jonquiere, Quebec, Canada. Right, cable plant, Saint-Jean-de-Maurienne, France.

12 Rio Tinto Alcan

Profile

22862_p08-13 Supplement

27/2/08

15:10

Page 7

Meet the skipper

Left and below, aluminium rolling mill, Ravenswood, West Virginia, US.

just over five years later in 2002. “The decision to uproot from California and leave, after 27 years, what had been a great company, staffed by outstanding people, was a tough one,” he adds. “In the end, though, it turned out well for me. “I joined Alcan because I thought it had great potential which had not yet been fully exploited. I caught the company on the cusp of dramatic change, just as it was about to triple in size through the acquisition of Algroup and then Pechiney.” Dick Evans made rapid progression through Alcan’s ranks and in 2006 was appointed its CEO. Now, as chief executive of Rio Tinto Alcan, he is responsible for an even bigger aluminium portfolio. What are his current priorities? “First I want to maintain the momentum,” he says. “Both companies were operating well before the merger and it’s vital we don’t lose that forward impetus. My second priority is to bring about a rapid and successful integration of the two companies so that we maximize the value created from the merger, both through short term synergies and longer term strategic advantage.” Evans speaks optimistically about the future of the aluminium industry, pointing to the steady year on year increase in the metal’s usage around the world. As with so many other primary commodities, China has played a key role in the aluminium demand surge, going from about five per cent in global consumption and production 11 years ago to more than 30 per cent today. Bright though Rio Tinto Alcan’s future may be, one of the serious constraints Evans and his senior management team are having to grapple with is the shortage of qualified technical people, a skills shortage which today plagues the entire minerals sector. However, bringing the two companies together has meant there are some manpower overlaps, and this in turn will allow engineers and other technical experts to be freed up and redeployed into areas where the skills shortage is particularly acute. Additionally, the enlarged company should prove even more attractive as an employer. “Talented, qualified people will naturally want to join, and stay with, the industry leader,” Evans argues. “We are the world’s leading bauxite and aluminium producer and we are on track to be number one in alumina as well. We have the best pipeline of new projects coming through.” It is a potent combination of assets and one that Dick Evans and his colleagues in Rio Tinto Alcan are determined to exploit.

. . . both companies were operating well before the merger and it’s vital we don’t lose that forward impetus.

Peter Brigg is a freelance business writer based in Surrey, England.

13 Rio Tinto Alcan

Profile

22862_p14-17 Supplement

22/2/08

15:55

Page 2

DOWN TO EARTH Chris Morrissey focuses on bauxite, the ore from which aluminium is derived.

22862_p14-17 Supplement

29/2/08

09:50

Page 3

Down to earth

In our hands: Rio Tinto Alcan’s business is grounded in the giant Weipa bauxite resource in northern Queensland.

A detailed world atlas will show you several places called Alum, after a group of minerals from which Humphry Davy reasoned (in 1808) that the metal we know as aluminium must exist. But it has to be very detailed indeed to show the little town of Bauxite in Arkansas, US (pop. 432), named after a material that is the only important ore of that metal and forms major deposits right around the world. Another town named after it is Boksitogorsk in western Russia, situated about 200 miles east of St Petersburg and just below latitude 60N. The location is surprising, as bauxite results from an intense form of tropical weathering and most known deposits lie much closer to the equator. It is because the Russian deposits are so extraordinarily old – about 350 million years, compared with less than 100 million for most bauxite deposits – that they are so far north. When they formed, western Russia lay within 25 degrees of the contemporary equator. Presumably it had a tropical climate marked by alternating dry and wet seasons – conditions that promote chemical weathering. Over much of the intervening time, however, the continent of Africa has been shunting northwards, pushing ancestral Europe, including what is now western Russia, ahead of it. Alumina rich Bauxite actually gets its name from a delightful and gastronomically noted village in southern France, Les Baux-deProvence, where alumina rich red clays (see panel, right) were discovered in 1822 – three years before aluminium itself was first isolated in the laboratory. Early production of bauxite was entirely for non metallurgical uses, which today account for only about five per cent of total usage. The French discovery was followed by others in a number of other countries in a broadly defined Mediterranean bauxite province that continues to make a small contribution to world mine production (roughly three million tonnes out of a total approaching 140 million). Six countries, with Australia way out

in front, supply about 90 per cent of that last figure. Next in importance are Guinea, Brazil and Jamaica; then, where metallurgical material and market economies are concerned, India and Venezuela. China surpasses the last two in tonnage terms, but its output has a high proportion of non metallurgical material. In several cases the national output comes almost entirely from just one or two giant, district-sized deposits. Giant deposits have taken millions of years to reach their present size and composition. The processes involved are slow, so such deposits tend to be found in parts of the tropics where nothing has happened to reverse their effects or destroy their products. So called Precambrian Shield areas, which form the stable nuclei of most continents, are clearly favourable when they lie at low latitudes. On the other hand, basalt is clearly favourable as a parent rock, and that is not a sign of geological stability. The huge Weipa deposit on Cape York Peninsular in remote northern Queensland provides an example of scale. The laterite spread it relates to, clearly visible in satellite photographs, extends over at least 80,000sq.km. Within that, the main bauxite resources, those of actual or probable economic value, make up an irregular area amounting to some 5,000sq.km. The bauxite averages about 3m thick, reaching up to 10m in some places. At the end of 2007 there were 1.2 billion tonnes of reserves and 2.2 billion tonnes of resources with an annual production capacity of 18.2 million tonnes of bauxite. Dwarfing the nation’s entire bauxite stock as it was known at the time, it was the Weipa discovery in 1955 that started

What’s in a name? Alumina is the simple oxide of aluminium, expressed by the chemical formula Al2O3. Conventionally the aluminium content of rocks and minerals is given in terms of alumina, implying that the metal accounts for just under 53 per cent of the stated content. A synthetic oxide with the same name and formula is used as a feedstock in aluminium smelting by the Hall-Héroult process. It is normally yellowish white and sandy or floury in texture. It has a wide range of other uses, for instance in abrasives, ceramics and refractories, as a filler and catalyst, and in glass making and water treatment. Rather confusingly, the plural word “aluminas” is sometimes used as a collective term for natural aluminium oxides, which include corundum and its gem forms ruby and sapphire. And to add to the complications, aluminium becomes aluminum in the US.

15 Rio Tinto Alcan

Profile

22862_p14-17 Supplement

27/2/08

15:17

Page 4

Down to earth

Australia’s climb to dominance of world bauxite production. It happened, said pioneer geologist Haddon King, with “minimal” recourse to geological reasoning. “Sudden” is another word he used about it. It was a search for oil that first took Harry Evans to the Weipa area. When he made a second trip later in the same year to follow up sightings of bauxite it only took him a few days to examine 84km of coastline from a perilously small boat, recognize a major bauxite resource and get a measure of its size. At least 250 million tons was his estimate in a report to Consolidated Zinc CEO “Maurie” Mawby. “I think we may have to knock a nought off that figure,” was Maurie’s initial reaction. Eye in the sky The days when an enormous bauxite deposit could be found by eyeballing a remote area from a small boat are

Below: the Gove bauxite mine and alumina refinery with loadout on northern Australia’s Gulf of Carpentaria. Right: across the Gulf, a stacker operating at Weipa.

16 Rio Tinto Alcan

Profile

probably past. Nowadays exploration is more likely to start in the office, by examining old reports, data and maps. Travel around the field area may be by helicopter, which can also be used for making closer range observations of an area’s landform and vegetation as indicators of the presence of laterites. In forested regions with a network of navigable waterways it may be largely by boat, with some possibility of spotting bauxite in the riverbank. In any case, bauxite exploration usually involves a great deal of legwork, to cover the ground adequately and take enough samples. Pitting is often necessary, or shallow drilling, to reach the bauxite through overlying materials. However typical it looks in colour and texture, its potential as a source of aluminium or for some non metallurgical use can only be guessed at until key aspects of its mineralogy and chemistry have been determined in a specially

equipped laboratory. Crude measures of a bauxite’s quality are its content of alumina and reactive silica, and the identity of the main ore mineral(s). Together, they are a pointer to its likely yield of alumina using the Bayer caustic leach process. Mineralogy matters from early on because diaspore does not respond to the Bayer process without pre heating, and with boehmite the process has to be run at a higher temperature than with gibbsite (see panel, facing page). Impurity levels matter also, to the extent that they affect the efficiency of the Bayer process and its unit cost in terms of such key variables as energy and caustic soda consumption. Process efficiency and cost set the intrinsic value of bauxite, though many other things have to be factored in before deciding whether or not it is worth mining. Chris Morrissey is a former chief geologist of the Rio Tinto Group.

22862_p14-17 Supplement

22/2/08

15:55

Page 5

Bauxite - the material You could say that in bauxite Nature makes a meal of its own leftovers. As Haddon King put it in “The Rocks Speak”, the ore minerals in bauxite are not so much concentrated by addition as left behind when almost everything else is subtracted. The result is an alumina rich residue that may be any colour from white through shades of yellow and red to deep brown, and any texture from earthy and clayey to compact and bouldery. It is related to the much more common tropical weathering product called laterite, which has many of the same constituents but a higher proportion of iron. A variety called aluminium laterite bridges the compositional gap between the two but generally falls short of making ore. Bauxite deposits may be pockety, blanket like, or interlayered with solid rock. The bauxite may have formed where it is or been moved there by some combination of water and gravity. Its parent could have been almost any rock or earlier weathering product that contained aluminium, including fairly pure limestone. Limestone derived deposits, best developed in Jamaica, tend to be pockety. More important are laterite related deposits, which can spread continuously over thousands of square kilometres. Fossil bauxites may be sandwiched between solid rocks and are sometimes worked underground, but most economic deposits lie under nothing but laterite, soil and vegetation and can be worked in open pits. The ore minerals are hydrated oxides of aluminium – two called diaspore and boehmite (or böhmite) with an alumina content of 85 per cent, and a third called gibbsite with 65 per cent alumina. They form at the expense of aluminous precursor minerals such as feldspars and clay minerals, usually as microscopic grains and coatings. The coatings give small (say 0.5-1cm diameter) spherical concretions called pisoliths, and even smaller ones called ooliths. Other typical constituents are iron oxides and hydroxides, kaolinite, quartz and small amounts of titanium and zirconium minerals. They have no commercial value in themselves, though several of them have a definite bearing on how the bauxite is used and how it responds to processing. There have been attempts at co-producing bauxite and the high grade kaolin that sometimes lies above or below it. In some regions there are clear geological links between bauxite and gold. Systematic assaying of bauxite exploration drill cores helped to delineate the Boddington laterite hosted gold orebody in Western Australia.

22862_p18-23 Supplement

27/2/08

17:03

Page 2

REACH FOR THE SKY Julian Cribb reports on how the formation of Rio Tinto Alcan has united two top metallurgical R&D teams in a worldwide drive to make aluminium the twenty first century’s greenest metal.

18 Rio Tinto Alcan

Profile

The latest Audi, Jaguar and Chevrolet Corvette supercars and the giant Airbus 380 rely on aluminium for their outstanding performances, fuel efficiency and low greenhouse emissions, highlighting it as the structural metal of the future. In the first decade of the twenty first century, the aluminium production process is being reinvented within Rio Tinto Alcan, the world’s largest producer since the merger of Rio Tinto with Alcan in late 2007. Plans are far advanced to slash greenhouse gas emissions, cut energy per tonne of metal and shrink ecological footprints – while maintaining fierce price competitiveness against rising metals giants such as China and Russia. Once worth more than its weight in pure gold, aluminium was chosen in 1855 to create a royal dinner service for Napoleon III because of its very rarity. Today, thanks to Messrs Hall and Héroult, who in 1886 simultaneously invented an electrolytic process for extracting the metal from its oxides, it is the world’s most popular non ferrous metal, with production now in the realm of 40 million tonnes a year – over a tenth of which is produced by Rio Tinto Alcan. Global state of the art aluminium production is due to start shortly in the Saguenay region of Quebec, Canada, where construction is under way on a pilot plant producing 60,000 tonnes of metal a year. This plant will pioneer Rio Tinto Alcan’s

much anticipated AP 50 aluminium extraction technology, designed to send a sizzling 500,000 amperes through the melt in the name of more metal at benchmark specific energy consumption. The fact that the energy source will be green hydroelectric power with zero carbon emissions gives the plant an even more futuristic feel. Breakthrough technologies “The pressures from climate change are omnipresent,” says Don Macmillan, vice president, Technology and Operational Excellence for Rio Tinto Alcan Primary Metal, in his soft Scots burr. “We’ve been facing up to them for some years and have already had notable successes, such as all but eliminating fluorocarbon emissions. There are a number of breakthrough technologies, which we’ve been quietly working on, that will be channelled into the AP 50 platform. “In smelting,” he declares, “the big challenge is to pump as much current as you can through the melt while reducing unit energy consumption as much as possible.” AP 50 is designed to do just that, increasing current intensity to the highest level ever achieved in the industry – with spectacular scope for productivity gain, a smaller footprint, reduced capital and labour costs and a cleaner, greener, more price competitive product. AP 50 is the progeny of a dynasty of leading edge technologies developed by Rio Tinto Alcan and its forebears such as Alcan,

22862_p18-23 Supplement

27/2/08

17:03

Page 3

Reach for the sky

Pechiney and Alusuisse. Evolved over three decades through the AP 18 and AP 30 systems – today deemed the “gold standard” in aluminium production efficiency and employed or emulated in plants around the world – AP 50 will outshine previous performances, with an anticipated output of around four tonnes of metal a day per cell, an advance over the still widely used AP 18. For the same number of pots, an AP 50 potline will produce 67 per cent more metal than a 300kA potline and 40 per cent more than a 360kA potline. The medium-to-longer-term goal is to cut overall energy use per unit of aluminium produced by up to about a fifth, with an ultimate target of 11kWh per kilo of metal. These concepts will be developed and proved at Rio Tinto Alcan’s facility at StJean-de-Maurienne, France, and will undergo further development and “road testing” in Quebec. What goes on inside an AP 50 aluminium production cell is akin to the processes at the heart of a star – and the physics no less complex and elegant. A swirling maelstrom of heat, electrical currents, molten elements and immensely powerful magnetic forces must be modelled, dissected and fine tuned using the latest computational techniques to optimize the process of producing more metal for less energy. “The finessing of that process lies in very careful pot and electrical network

Far left: ALPSYS platform development work in progress. Left: lab testing at Ravenswood rolling mill in the US. Above: semi-quantitative surface analysis of a polished aluminium sample at the Arvida research and development centre in Canada.

design,” Macmillan says. “An awful lot of energy goes in, and only about half of it produces metal. The rest generates heat. So a major challenge is to get the thermal balance right. This involves a lot of finite element analysis and numerical modelling.” The second major challenge is to control what goes on inside the cell with fingertip precision – the plane of the anode, the gap between the electrodes, the flow of alumina into the cell. Here Rio Tinto Alcan has notched up one of its stellar advances in the “greening” of aluminium, overcoming the so called “anode effect” in which voltage surges cause the release of highly greenhouse-genic perfluorocarbon (pfc) gases, an environmental challenge that has bedevilled the world aluminium industry for decades. The group’s ALPSYS pot control system is poised to banish it for good, Macmillan says, besides boosting overall current efficiency. There remains, however, one soaring scientific peak which Rio Tinto Alcan’s researchers are determined to scale: eliminating greenhouse gas emissions from smelting overall. Currently, with hydropower, the main emissions arise from the burning of the carbon anodes which supply power to the melt – about a tonne and a half of CO2 for each tonne of aluminium produced. Where fossil fuels are used to generate the energy for aluminium production, 91 per cent of the total greenhouse emissions are typically in the smelting process, three per cent in mining the bauxite and six per cent in refining the alumina. This highlights the importance of tackling the emissions from power generation in countries where hydroelectricity and other “clean” energy options are not available. Clean coal As a business that produces more than half of its own energy, Rio Tinto Alcan finds itself in a leading position to hasten the introduction of new “clean coal” generation technologies such as integrated gasification combined cycle (IGCC) and carbon capture and storage (CCS), and much effort is now going into this. Between 1990 and 2005, Rio Tinto Alcan managed to drop its total GHG emission intensity by 25 per cent, with a further ten per cent targeted by 2010. The long term dream is to zero the greenhouse contribution of aluminium smelting altogether. Such vaulting ambition is of central importance in today’s climate sensitive market. The average car’s aluminium content has jumped from 240lbs to 357lbs in the quest for fuel efficiency. Peak oil and the higher fuel costs it ushers in will only accelerate that trend, and while resins,

plastics and titanium compete at the margins, the car of the future is likely to be substantially built from aluminium. If the aluminium can come without greenhouse penalty, it will be doubly attractive to motorist and manufacturer alike. “The Holy Grail for aluminium production is greater energy conservation and lower environmental impact at lowest full economic cost,” Don Macmillan states. And, like knights of old, he keeps the Grail clearly in view, knowing the formula of competitive price plus green status will be sovereign in fending off the challenge from rising metals powers such as those of China and Russia. Rio Tinto Alcan’s present technological ascendancy is an amalgam of the wisdom from several “tribes” of researchers, each in its unique way at the cutting edge of its field – Alcan, Pechiney, Alusuisse, Comalco and Rio Tinto being the main contributors. Today these once competing teams have been forged into one of the world’s most potent and forward looking metallurgical research enterprises – a global organization of some 500 staff who together represent the undisputed industry leaders in aluminium smelting technology, declares Don Macmillan, “We are all dedicated to making aluminium the world’s green metal of choice,” he says. Rio Tinto Alcan Applied Engineering Centres cover the full chain from exploring for high yield bauxite deposits to the development of superior packaging for gourmet foods or medical devices, novel aerospace alloys, electrical cables that don’t catch fire, flat TV screens and clean water solutions for developing countries. Their strength lies in the ability to network leading minds in real time into virtual research teams which span the globe and can crash tackle even the biggest challenges. Their spear point is the proof of concept facility at St-Jean-de-Maurienne, where the best ideas become reality. The philosophy that impels all this is articulated by Jacynthe Côté, president and CEO of Rio Tinto Alcan Primary Metal, who says: “Today’s globalized world is a world confronted with environmental and social challenges, but we are convinced that there is an increasingly close relationship between the protection of the environment, socio-economic progress and competitive advantage. “Definitions of sustainability abound but the common denominator among all of them is that sustainability is about making decisions and taking actions to create economic, environmental and social conditions that generate the most value for everyone, today and for generations to come,” she adds. The same drive for sustainability and cost efficiency permeates the upstream

19 Rio Tinto Alcan

Profile

22862_p18-23 Supplement

27/2/08

17:03

Page 4

Two members of the ALPSYS team, Benoît Sulmont and Stephane Prodent, working on the project.

restoring the site to a condition very close to its original state.” This involves careful handling of the topsoil so as not to lose precious fertility, insightful management of site conditions, hydrology and soil biology and replanting with the keystone native species that will regenerate the ecosystem. Such knowledge, pioneered by bauxite miners, may have a powerful role to play in the future by helping to restore the world’s tropical forests from the clearing of recent decades

tasks of mining bauxite and refining alumina, where the aim is to position Rio Tinto Alcan in the first quartile of the industry cost curve. The Bayer process for extracting alumina from bauxite – which fathered modern hydrometallurgy – has mainly seen incremental change since its discovery in 1887, says Vincent Christ, Rio Tinto Alcan’s general manager of Technology. In view of the fact that energy accounts for a quarter of today’s production costs, the goal is a step change in energy efficiency along with enhanced recovery of the caustic soda used in the process. Rio Tinto Alcan is in the pilot plant stage of improving solid liquid separation. This generates gains in washing efficiency and results in both better soda recovery and a thicker bauxite residue stream, which is easier to neutralize. At the same time major improvements are being made to liquor yield and productivity, leading to lower energy demand. Expansion Other measures taken by Rio Tinto Alcan to improve the efficiency of alumina production include using a pre-assembled module strategy for its huge alumina expansion project at its Gove site in Australia. The strategy entailed major equipment components being fabricated and fitted offsite and shipped to Gove ready for installation, which not only heightens cost savings and construction efficiency but is also a solution perfectly tailored to remote resource development projects. This strategy formed part of a plan to almost double Gove’s production capacity from two to 3.8 million tonnes a year in 2009. At the same time, says Vincent Christ, plans are on the drawing board for a novel, more compact style of alumina refinery –

20 Rio Tinto Alcan

Profile

one that is lower in capital, energy and labour costs and has a smaller environmental footprint. This has become feasible thanks to the world’s soaring appetite for light metal which is creating the opportunity for Rio Tinto Alcan to build a new aluminium smelter at least every three years. “To feed these smelters we need to build a new alumina refinery at least every five or six years, and this gives us the opportunity to rework the design,” he says. The other big environmental question hanging over the global alumina industry is what to do with the 50 million tonnes of bauxite residue it produces each year as a by product of extraction – one of the world’s larger residue management challenges. On average, a tonne of alumina generates 0.6 to 0.9 tonnes of bauxite residue. An innovative approach to managing this challenge has been developed at Rio Tinto Alcan’s laboratory at Gardanne, France, where residue is filtered, dewatered and transformed into a commercially viable product known as Bauxaline®, suitable for use as a ground cover layer to seal, protect and rehabilitate waste landfill, or as a fill and foundation material in civil engineering projects such as road embankments. In bauxite mining the main challenges are to increase the efficiency of the mining and blending operations, says Oscar Groeneveld, former CEO of Rio Tinto Aluminium and now strategic adviser to Rio Tinto’s CEO, Tom Albanese. This is essential for driving down energy consumption and greenhouse emissions in the mining process and accelerating the restoration of the landscape to native forest. He explains: “Most bauxite mines will continue to be open cut because most orebodies are close to the surface and the tonnages of material involved are so vast, but we now have decades of experience in

Restoration Reducing the footprint of such large operations as bauxite mining, which cover thousands of hectares, is challenging, but can be achieved by ensuring that restoration follows the mining as closely as possible. “The main areas for cost efficiencies in bauxite production lie in minesite design – disposition of hubs and spokes that minimize materials haulage and handling, strategic use of rail and, where appropriate, automation for safety and operational efficiency,” says Groeneveld. “In addition to this, an organization must address the shortage of skilled labour in remote locations. All this combined will contribute towards lower overall greenhouse emissions from the aluminium sector. “We’ve seen smelting emissions come down significantly due to vastly improved process control – similar opportunities and challenges apply to bauxite mining and refining. There are also prospects for improving the dissolution and crystallization processes at lower temperatures that could lead to big savings.” The Grail here, in Groeneveld’s view, is a method that immobilizes reactive silica present in bauxite and prevents it from locking up precious soda, which would reduce the waste associated with one of the industry’s biggest inputs. Like Vincent Christ, Groeneveld sees bauxite residue to be a major challenge for the industry. In populated regions it may be turned into bricks and tiles, used to build roads or to line irrigation channels. And there is some evidence it can be used to amend agricultural soils which have become too acidic or are contaminated by heavy metals; but, for now, it remains a conundrum.

Julian Cribb is adjunct professor of science communication at the University of Technology, Sydney, and was previously science editor of “The Australian”.

22862_p18-23 Supplement

22/2/08

16:00

Page 5

BIRD’S EYE VIEW Stepping back to look across the years is Mike Reilly, reflecting on over a century of Alcan history. Above, Paul L T Héroult, who discovered the electrolytic reduction process at the same time as Charles M Hall. Left, first Shawinigan smelter rises, brick by brick, leading to the first aluminium production in Canada, October 1901. Below, construction begins on the Shipshaw hydroelectric project near Jonquiere in 1930.

Alcan’s proud history stretches back to 1902, when it was created as a northern arm of the predecessor of the US based Alcoa. Canadian operations expanded on the back of enormous hydroelectric potential across the lower eastern edge of the Canadian Shield, home to a spidery network of snow and rain fed rivers in Quebec province. Power generation and smelting operations came rolling in to what had been small sleepy towns on the edge of miles of wilderness and barren ground. The dam and generator construction activities, close to where many rivers pour into the St Lawrence with its deepwater shipping capacity, harnessed massive amounts of power, especially from Quebec’s Lac St-Jean and the Saguenay River gorge. Alcan lost no time establishing itself. Buying the Roberval and Saguenay Railway, the firm took control of a vital transport link between port and plant not far from Quebec, downriver from its Montreal headquarters. In the 1920s, plants to produce wire and cable, cooking utensils and other end products were established in Toronto and Quebec locations in parallel with the growing alumina production facilities. Demands for infrastructure where none existed brought the company into housing. Thus, in the same decade, the city of Arvida (now part of Ville de Saguenay) was established near the power and alumina production facilities on the Saguenay River, to become over the next decades a principal location of several production facilities and power houses, including the largest in the world at the time on Isle-Maligne. Model city The name Arvida came from the first two letters of the three names of Arthur Vining Davis, president of the parent company Alcoa. It was a model city, designed to accommodate up to 40,000 people, anticipating everything they would need from schools to churches. Davis went on to be one of the best known names in America, promoting aluminium use and fighting US governmental controls even as he won plaudits from the same government for his work with aluminum during the war years. Meanwhile, capitalizing on its profitability and business prowess, Alcoa’s Canadian subsidiary, the Northern Aluminum Company, either bought into or created a wide range of

21 Rio Tinto Alcan

Profile

22862_p18-23 Supplement

22/2/08

16:00

Page 6

Left: 1939, Northern Aluminium begins managing the Rogerstone factory in Wales producing aluminium components for aircraft. Below left: the Soderberg potroom at Arvida, Canada, 1945.

aluminum companies across northern Europe, beginning early in 1909 with the establishment of a UK subsidiary, Northern Aluminium Company, later to become part of British Alcan Aluminium. Moving quickly in the first decades of the twentieth century, the company’s footprint extended into France, Norway, Denmark, Germany and Italy. Other non American operations were added in 1928 when Alcoa decided to divest into a single vehicle most of its primary overseas businesses. By then, Alcan was so large that its home country, Canada, could only absorb 15 per cent of its production output. Globalization, while not a common term at the time, was what Alcan was all about. During the 1930s, Alcan was a full blown world aluminium provider with its hand in everything from pit to (frying) pan. To deal with its now sprawling business the company embarked on a programme of shaping and trimming around the world. Various elements were sold, reduced or closed down. But even as consolidation was the general watchword, Asia came into sharper focus. The company established businesses in Japan, India, and finally Australia, where it founded the Australian Aluminium

22 Rio Tinto Alcan

Profile

Company in 1939 with two other partners. Already buying its bauxite from Australia as well as other offshore sources, direct participation in the industry locally was long overdue. Critical contributions The demands of World War II amplified aluminium use, especially as air power rose to prominence well beyond any previous conflicts. The breadth and depth of aircraft use, and losses, pushed output to levels no one could have imagined. A major factor in aeronautical development in Canada and the UK in the early years, Alcan’s contributions to the industry also were critical when the US joined the war effort later on. During the period Alcan pushed forward with its already planned expansion of installed smelter capacity at Canadian facilities, crossing the 500,000 tonne mark in 1943. That may seem less than impressive by today’s standards, but more than half a century ago the number was eye popping and, as in the rest of the industrialized West, the escalating war effort brought even more remarkable capability. By March of 1944 the company hit a wartime peak at all Quebec smelters of 1,400 tonnes per day.

The war by no means impaired the growth of Alcan on a global scale: it may even have helped. South America was particularly important. Rolling capacity was built in Mexico, bauxite was the target in Jamaica and Alcan set up Alumínio do Brasil SA in the continent’s southern cone. Across the Pacific there was more expansion with the beginning of rolling and smelting operations in Granville, Australia and, to the north, start up of a new smelter in Alupuram in Kerala state, India. There were six iterations of the company name through its history before the merger with Rio Tinto, but it was not until the end of World War II that the name Alcan actually appeared, registered in 1945 as a trade name when the final connections with Alcoa were declared severed after a protracted legal battle (during which, among other things, Alcoa argued that no one else should use the word “aluminium” in business). It took a couple more decades to give the Alcan name to the full enterprise – the corporate name changed from Aluminium Limited to Alcan Aluminium Limited in 1966. The postwar years were a blur of

22862_p18-23 Supplement

22/2/08

16:00

Page 7

Below: feedstock for the production of secondary alloys arriving at Alcan Enfield Alloys, London, 1960. Right: fabrication starts at Utinga, Brazil, 1948. Below right: sand casting operations in 1943 at the Etobicoke works near Toronto.

additions and modifications to Alcan’s global presence. There were expanding power projects, new bauxite operations and dozens of new refining plants and downstream businesses created or bought, either in part or in full, between 1950 and the late 1990s. In addition to other locales, the company’s presence appeared in Colombia, Venezuela, Uruguay and Argentina in parallel with large expansions in Brazil. Acquisitions Jumping finally into the US market in 1960, Alcan teamed with three partners to create a big new rolling mill in Oswego, New York. More than a dozen acquisitions and expansions followed – many, like Oswego on the shores of Lake Ontario, along the newly opened St Lawrence Seaway which at completion ran to well over 2,000 miles long. In Asia and Oceania, China, Malaysia, Indonesia and New Zealand were new names in Alcan’s geographical roster and expansion moved dramatically in Australia and India with rolling mills, extrusion plants and aluminium smelters building capacity. While much of the concentration was on rolling mill operations, the postwar

expansion brought the company into nearly all types of processing and products ranged from wire and cable to foils, powder and paste, among many others. It was time to take a breath and consolidate. Once more, trimming and shaping was applied to the business. Divestment and restructuring are recorded as the main actions in the company archives, but as before, new opportunities were not long to be ignored. The outstanding growth in the early part of the twentieth century notwithstanding, the 1990s soon became an era of even larger growth. Among other things, Alcan became the main supplier of aluminium to General Motors, the world’s largest auto producer. Its aerospace business, based on the company’s vital role in wartime production, moved to new levels as the industry grew. By 2006 for instance, the engineered products group at Alcan was the number one aerospace supplier of value added sheet, plate and extruded aluminium products in Europe. In overall size, the decade’s expansion was the greatest ever for the company, culminating with the acquisition of

Alusuisse and the laying of groundwork for the acquisition of the French group Pechiney. The three way combination did not go as smoothly as first envisioned in the late 1990s. The European Union stepped in with concerns over competition, and rather than comply with some of its demands, Pechiney withdrew from the merger. However, within a few years, Alcan formulated an approach to Pechiney that was to be successful and the formal acquisition was completed in December 2003. A year later the company spun out much of its rolled product into a new company, Novelis. This left Alcan with operations firmly focused upstream; more than half its assets were in bauxite, alumina and primary metals. Now at a size just about even with its founding former owner Alcoa, Alcan nonetheless found itself a target of an unsolicited offer from Alcoa. This move, early in 2007, was soon countered by Rio Tinto’s bid. Alcoa backed away and the rest, as they say, is history. Rio Tinto Alcan was born. Mike Reilly is a former Reuters correspondent and executive who writes on business, technology and travel from Long Island, NY.

23 Rio Tinto Alcan

Profile

22862_Cover Supplement

22/2/08

14:18

Page 6

22862_p13-15

22/2/08

14:06

Page 1

1

Ownership. Mining companies are required to sell a voting share of their operations to corporate entities that are owned or controlled by Historically Disadvantaged South Africans (HDSAs).

2

Preferential procurement. Where possible, operations are required to give preferred supplier status to black owned companies.

also requires that companies increase their employment of women, aspiring to a workforce comprising ten per cent women by 2009.

5

Housing and living conditions. Mining operations must work to improve the standard of employee housing, by upgrading existing accommodation and by promoting home ownership options.

3

6

4

7

Beneficiation. In partnership with the government, mining companies are Human resource development deals with expected to identify opportunities to increase requirements for mining companies to the local beneficiation of their products: from formulate skills development strategies, provide scholarships to promote mining related secondary refinement to the production of final consumer products. education, and train existing employees. Community and rural development. The employment equity pillar establishes Mining stakeholders are required to formulate targets for the equitable representation of HDSAs at management level. Operations are development plans for those communities affected by mining, and to ensure there is no required to have a black management participation of 40 per cent by 2009. This pillar discrimination against foreign migrant labour.

Seven pillars of transformation David Bannister looks at how Richards Bay Minerals is responding as the winds of change re-shape South Africa’s industry.

It was more than five years ago that the management of Richards Bay Minerals (RBM) first sat down to begin a transformation of their company. In a reformed South Africa, with new legislation and a focus on the empowerment of those who had suffered under apartheid, RBM’s team set out to plan how the company should meet these new conditions. Tackling issues of great depth and subtlety, they have considered how best to adapt to new laws, how RBM can work as a force for empowerment in the country, and how to achieve these goals whilst maintaining RBM’s excellent economic and commercial record. As a leading global producer of titanium slag, pig iron, rutile and zircon, RBM is a significant asset in Rio Tinto’s portfolio (owned 50:50 with BHP Billiton). Now, the five years of planning are coming to fruition. In June the company will submit a conversion application to

the South African government, outlining a plan for the sale of a 26 per cent stake in the company, in addition to further proposals concerned with social development, employment equity, and local beneficiation. Following South Africa’s first democratic elections, in 1994, the government passed a range of legislation aimed at redressing the historic imbalance between a largely white owned economy and those peoples who were disadvantaged under apartheid. A number of far reaching laws have come into effect, covering such areas as skills development, economic ownership, and demographic representation within the workforce. In 2002, the government passed the Minerals and Petroleum Resources Development Act (MPRDA), giving ownership of all mineral rights to the state. The MRPDA gave rise to the Mining Charter – a comprehensive roadmap for broad based economic empowerment

13 Rio Tinto

Review

22862_p13-15

22/2/08

14:07

Page 2

Seven pillars of transformation

within the mining industry. The Mining Charter presents “a shared vision of a globally competitive mining industry that draws on the human and financial resources of all South Africa’s people, and offers benefits to all South Africans”. The charter recognizes that women and black people (the term here includes white women, Indian and coloured peoples) were largely excluded from participation in the mainstream mining economy, and seeks to redress this through a number of mandatory requirements, to which all mining operations must adhere. The Mining Charter is based on a set of seven “pillars” for transformation, each dealing with a distinct facet of the process (see previous page), requiring a scored adjustment from all mining companies. All mining companies in South Africa have been given a deadline of April 2009 for the submission of applications for conversion. Each application will be scored according to how well its transformation plan adheres to the Mining Charter’s criteria, and a company will only be considered to hold “New Order Mineral Rights” once the government’s Department of Minerals and Energy (DME) has accepted its application.

14 Rio Tinto

Review

In fact, RBM has long been a national leader in terms of corporate social responsibility and Black Economic Empowerment (BEE). Over 2005-2006, RBM spent over one billion rand (US$146m) in procuring goods and services from BEE companies. It has also helped the establishment of a number of BEE startups. They include Ascent Mining Services, which has a dry mining contract at RBM’s ponds worth millions of rand per year; Isolezwe Security, which performs

security duties at RBM’s mine sites; and North Safety Products, which has a 50 per cent BEE ownership comprised entirely of rural women. These and other initiatives by RBM have worked to create over 1,800 jobs in the poorer communities which surround the mine. In 2006 the company received the Corporate Enterprise Development Award at the respected “Investing in the Future” ceremony, run by the Mail & Guardian newspaper. It is with the benefit of these achievements that RBM moves towards

22862_p13-15

22/2/08

14:07

Page 3

Seven pillars of transformation

the submission of its conversion application. In some areas the company is already in compliance with, and exceeding, the requirements of the Mining Charter. It already provides its employees with a housing and meal subsidy, and has never accommodated staff in the single sex hostels which dominate some other operations. It is already focused on the development of skills for its employees and the local community, and is presently investigating the possibility of establishing a Faculty of Engineering and Technology at the University of KwaZulu Natal, to address critical skills shortages. The most significant changes at RBM will come through the sale of an ownership stake in the company. The charter requires that a minimum share of 26 per cent be sold at fair market value to Historically Disadvantaged South Africans; this gives an exercisable vote in the company. In some other BEE conversions this requirement has resulted in a large share of a company being sold into the hands of a single individual or corporate entity, creating an elite class of the super wealthy, without bringing many broader benefits. General manager for Strategic Affairs Thabi Shange, who is overseeing the conversion plans, spoke about the steps RBM has taken to ensure a broad

Top left, the sale of RBM shares to a consortium of black community and business groups will benefit local people such as these growers showing off their crops. Left, a meeting of the Broad Based Black Economic Empowerment strategic partners. Above, rehabilitation of mined land at RBM, undertaken by a local Black Empowerment company. Right, RBM managers, from left: Bruce Beath, general manager, Finance, George Deyzel, retiring managing director, Cameron McRae, incoming managing director, and Themba Mkhwanazi, chief operating officer.

distribution of the 26 per cent stake. “We don’t want to take the old route, helping only the select few,” says Shange. “With this in mind we’ve brought together a consortium of interests, including black owned business, women’s groups, and the local communities, all of whom stand to benefit. We’ve also included our employees through an Employee Share Ownership Plan.” Selection process A broad based consortium has been assembled to buy the 26 per cent stake in RBM. After a selection process which started with 149 candidate BEE companies, six were selected to participate in the ownership of equity. These six companies will join the South African Women’s Association, and four local communities, in buying a 24 per cent stake in RBM. The remaining two per cent will be made up of an Employee Share Ownership Plan, paying dividends to RBM employees. The four communities involved are those located close to the mine – Dube, Mkhwanazi, Sokhulu, and Mbonambi. Their populations range from 25,000 to 60,000 people, and they will each buy a 2.5 per cent share of RBM, equivalent to ten per cent of the consortium’s overall stake. Each community will be represented by a trust, receiving dividends from the consortium which can then be used for community development projects, microfinance, and other initiatives. In addition to the carefully selected BEE companies, and the community trusts, a further two per cent of the stake will be purchased to found the Employee Share Ownership Plan (ESOP). Each employee who serves at RBM will receive a share of the dividends which the ESOP receives, representing a considerable amount for each of the mine’s 1,750 employees. The financial dimensions of the transaction are complex, and much care has been taken to create the best arrangements for both the new consortium and the existing shareholders. RBM and its shareholders are in the process of drafting optimal voting agreements, defining when the new consortium is able to exercise its power of veto, and finessing certain financial aspects of the transaction. “There are few BEE transactions which offer such a win win opportunity,” says Bruce Beath, general manager for Finance at RBM. “We are able to arrange financing for the consortium by using RBM’s balance sheet as surety, meaning that local banks are comfortable with funding the transaction. We are also able to restructure certain aspects of the

company to facilitate this funding.” The empowerment of RBM’s two subsidiary companies (Tisand and Richards Bay Iron & Titanium), also allows for the optimization of existing projects, ensuring that they are brought online at the right stage. Bruce emphasizes that RBM is not giving away the 26 per cent share, contrary to some perceptions of BEE deals – the stake will be bought for fair market value. “RBM already exceeds the requirements of legislation governing the mining industry,” says George Deyzel, RBM’s outgoing managing director. “Our focus is to ensure that the transaction is as broad based as possible, to benefit people at grassroots level. This new partnership reflects our commitment to transformation and sustainable development in South Africa.” In the face of inevitable and necessary changes in South Africa, RBM’s proposed conversion presents an approach which offers all round gains. The existing shareholders will benefit from the considerable long term opportunities which compliance with the Mining Charter will bring, in terms of continued operation and profit. The BEE consortium, local communities, and the employees themselves will certainly benefit from economic participation in a highly successful mining enterprise.

David Bannister is a freelance writer and journalist, based in South Africa.

15 Rio Tinto

Review

22862_p16-20

22/2/08

15:48

Page 2

A mountain to climb

22862_p16-20

22/2/08

15:49

Page 3

Facing page and left: iron ore exploration in progress high in the interior of Guinea, west Africa. Inset, global head of Exploration Eric Finlayson.

mining industry. Indeed, as Finlayson points out, a similar success rate has emerged from studies of global research and development across many industries. In other words, whether it’s electronics, pharmaceuticals, or mining, there seems to be some deep, underlying connection in the process of opportunity generation. (The experts have dubbed this phenomenon the Universal Success Curve.) But this doesn’t mean Finlayson is content to accept the 0.03 per cent industry norm. “In the past few years we’ve achieved one in 2,500 or even 2,000,” he says, “but we’re constantly striving to do better still. That’s what exploration performance improvement is all about: reducing the number of misses before you get your hit.”

Statistically, the task looks truly awesome. And, Peter Brigg discovers, Eric Finlayson’s Exploration teams need to strike it rich to provide a flow of new projects for the Group.

Eric Finlayson, the 47 year old Scot who has been in charge of Rio Tinto’s Exploration group since the beginning of last year, is nothing if not a realist. It’s a quality much needed in his job. He has a mountain to climb. “The fact is, most exploration is unsuccessful,” he admits. “A few years ago, we analysed our performance and found that for every 3,000 ideas which go in at one end of the pipeline, only one discovery pops out of the other end. And we’re not talking hare brained ideas here but solid, defensible targets.” Before calling for the instant dismissal of Finlayson and the entire 950 strong Exploration team for converting a meagre 0.03 per cent of prospects into a successful commercial outcome, we need to be aware that this is very much the norm for the

Intersections The Exploration group aims to bank, on average, one discovery a year and over time it has managed to hit this target fairly consistently. However, as a measure of success it is a rather crude one. A more useful performance yardstick is the number of “economic intersections” made in a given year. Finlayson explains that an economic intersection occurs when you drill a hole and encounter mineralization of such grade and width that if the orebody were to extend beyond the drill hole in any significant direction, it would mean the deposit was economically viable. “Historical analysis has shown that one in ten economic intersections results in a discovery,” he adds. “So, if we are aiming for at least one discovery a year, we should expect to be making about ten economic intersections annually. On the other hand, if you are working an exploration area that has not turned up any economic intersections for several years, it’s time to think again.” Eric Finlayson grew up in a coal mining town in central Scotland but he says it was not the local mining activity which made him want to become a geologist but rather a desire to escape from an unattractive urban environment and see the world. That desire for travel had originally been kindled by a family holiday in Spain – still in the 1960s an out of the ordinary destination rather than the package tour destination it later became – coupled with a boyhood interest in philately and the exotic places the stamps revealed. A career in geology would, he thought, offer him a passport to see the world, and

17 Rio Tinto

Review

22862_p16-20

22/2/08

15:49

Page 4

A mountain to climb

so he took up the offer of a place at the University of Strathclyde in Glasgow, where he studied for a degree in Applied Geology. After graduating, he worked as an exploration geologist in Ireland and Turkey, before having a short spell as a geochemist in Malawi, where he was looking for uranium to fuel Britain’s nuclear power stations. Finlayson joined the Rio Tinto Group in 1989 when he was recruited into Kennecott Exploration as a project geologist. Based in Sydney, he was responsible for copper and gold exploration in the highlands of Papua New Guinea (PNG) – an area with which he was very familiar because he had just spent five years there, helping conduct a national geological survey for the PNG government. Looking back on his time in PNG, he says it was physically the most arduous but probably the most enjoyable work of his entire career. “I was meeting people from isolated communities,” he recalls. “Dogs would sometimes howl and children flee in terror at the sight of their first European. “In 1984, I was on a two week expedition, cutting through the rain forest and hoping the helicopter would find me again, when I bumped into a small group

18 Rio Tinto

Review

of forest people. One of them had a bag containing the smoked remains of his grandmother. In PNG, eating dead relatives is part of a religious process that is believed to release the spirit of the deceased. He kindly offered me a piece of his grandmother in exchange for some of the items I was carrying. I declined, but to this day part of me regrets passing up the opportunity, legitimately and in a culturally acceptable way, to eat someone!” Fearsome fellow On another occasion, this time searching for gold deposits for Kennecott, Finlayson found himself surrounded by several

...we’ve found four more deposits close to the original one, meaning that instead of two billion tonnes of mineralization we could be looking at eight billion.

thousand native prospectors who were visibly disappointed and angry at their lack of success in finding any of the gold that was rumoured, falsely as it turned out, to lie in the area. “One fearsome looking fellow, who was wearing a World War II Japanese helmet and waving a bayonet under my nose, was particularly incensed,” Finlayson recounts. “I truly thought he was going to kill me. Fortunately I was able to mollify him. When the helicopter returned – it had left me alone while it went to refuel – I jumped aboard shaking like a leaf.” After five years based in Sydney, during which time he formally adopted Australian citizenship, meaning he now has dual British/Australian nationality, Finlayson moved to Vancouver. Initially he was Kennecott’s regional exploration manager for western Canada but he subsequently took on responsibility for the whole of Canada. In 2000 he transferred to Rio Tinto’s London as assistant to the head of the Exploration group, before being posted two years later to Perth in Australia. There he spent five years running the Group’s exploration programme in Australia, India and Indonesia. Eric Finlayson likes to spend his leisure time with his Korean partner, Kumju, and

22862_p16-20

22/2/08

15:49

Page 5

A mountain to climb

Pilbara in Western Australia we are constantly turning up new iron ore mineralization. In the past five years the Exploration group has handed over about 2.2 billion tonnes of mineralization to Pilbara Iron. For every two cents we spend on exploration there, we are finding one tonne of mineralization, which by any measure is a tremendous return on investment. “At La Granja in Peru, we thought we were evaluating a single copper deposit but in the last 12 months the exploration team has found four more deposits close to the original one, meaning that instead of two billion tonnes of mineralization we could be looking at eight billion,” he says. “Or take aluminium. We’ve obtained some very interesting results from reconnaissance exploration for bauxite in Brazil and Colombia, including some from areas where no bauxite had previously been found. “In Mozambique we’re working on a couple of heavy mineral sands prospects. Like the ilmenite deposits in Richards Bay in South Africa, they’re right beside the beach and their chemistry is identical to what’s going currently into our Richards Bay smelter, so it looks as if we shall have a secure future feedstock for that plant.”

their two young children, Euain, three, and Eumi, two. “We take them swimming and walking every weekend,” he says. “And I have a 17 year old daughter, Morgan, who is a good lacrosse player, so on Saturdays I’m often on the touchline supporting and cheering her on.” A keen cook, he admits to being “infuriatingly slow in the kitchen”. He enjoys reading but regrets that work and family pressures mean he has less time for that recreation than he’d like. He says his favourite book would be either The Tin Drum by Günter Grass or the notoriously dark American Psycho by Bret Easton Ellis. Finlayson’s move back to London at the beginning of 2007 as head of the Exploration group marked the start of a new and exciting phase of his career and he talks with enthusiasm about the host of promising exploration developments now in Rio Tinto’s portfolio, some of them close to existing operations, others in totally new areas. “We’ve been mining copper at Bingham Canyon in Utah for 100 years and thought we knew it like the back of our hand,” he says. “But to our surprise, right below the open pit, exploration geologists at Kennecott Utah Copper have discovered a molybdenum-dominated orebody, about 1km high and 300m wide. Or again, in the

Opposite page: Exploration drilling at the Resolution Copper project in Arizona. Above: high tech geological investigation is supported by experts on the spot – there is no substitute for geologists on the ground, says Finlayson. Below: schematic of the Bingham Canyon pit where, after 100 years of mining, new deposits continue to be discovered.

Prospects Among the many other interesting prospects Finlayson and his Exploration team have in their locker are a couple of good zircon finds in Australia. Zircon, a high value, heavy mineral used in the manufacture of ceramics and TV screens, is much in demand in China. Then there are several promising coking coal projects under way around the world – notably in southern Africa. Meanwhile, in northern India, an

19 Rio Tinto

Review

22862_p16-20

22/2/08

15:49

Page 6

Hot on the trail: a rig on the road to a drill site at the Simandou project.

order of magnitude study of a diamond discovery should be completed later this year. Although not a giant project, it’s nevertheless one of the top three diamond discoveries made anywhere in the world in the last five years. “There is no shortage of interesting opportunities available to us,” Finlayson says. “The trick is to make sure we prioritize them correctly.” So, how is the decision made as to whether to go looking for, say, copper rather than iron ore, or for bauxite rather than coal? “In a nutshell, we aim for a multi commodity portfolio that’s been built up by putting together the best opportunities we can find,” he explains. “That may mean very little coal exploration and a lot of Colourful mineral samples that provide clues to the existence of ore deposits.

copper in one year and the reverse a couple of years later, and so on. But it would make no sense to spend one quarter of our exploration budget on copper simply because one quarter of our net earnings in that year happened to be coming from that commodity. It would mean we were spending on opportunities regardless of how good they were. Because the success rate is so low in exploration you can’t afford to put money into second rate opportunities. Only the best shots will do.” Rio Tinto carries out most of its exploration programme using in-house resources. According to Finlayson the outsourcing model has several drawbacks. First, there can be a lack of alignment between the objectives of the major company sponsor and those of the junior company proxy explorer. “At Rio Tinto we’re interested in giant, world class ore deposits,” he says. “A junior company which stumbles across a small deposit might get sidetracked onto a project that was not material to us. “Secondly, by keeping the programme internal we can exercise control over the management of important issues such as business ethics, health, safety and the environment. As other companies have found to their cost, underperformance by a proxy explorer on issues such as these can lead to a good deal of corporate embarrassment. So, from a governance perspective, we think it’s better for us to be in the driving seat.” Flexibility But this is not to say that Rio Tinto never uses third party proxy explorers, recognizing that their flexibility and specialized local knowledge can sometimes offer particular advantages. “Rio Tinto’s decision to carry out its own exploration programme has been vindicated

by our discovery successes,” Finlayson argues. “Our record speaks for itself.” Since 2002, minerals markets have strengthened significantly and exploration investment by the industry has gone up in line with this. In 2002, global exploration expenditure was in the region of US$2bn. By 2007 it had risen fivefold, to more than US$10bn. Rio Tinto’s own exploration expenditure has reflected this industry growth trend, though not to quite such a dramatic extent. In 2007, the Group spent almost US$200m on pure exploration compared with US$100m back in 2002. These figures do not include the cost of prefeasibility studies and other advanced project work that is carried out by the product groups, after an exploration venture is handed over to them by the Exploration group. Finlayson is at pains to emphasize that there is no good linear correlation between spending and success. This is true of industry as a whole and, within it, Rio Tinto. “We’ve done the analysis,” he says. “It’s not a case of the more dollars you spend, the more you find. It just doesn’t work that way.” The reason, he says, is that every organization has a limited capacity to spend money effectively. If you go above that capacity the law of diminishing returns sets in. In other words, there is an optimal expenditure for a given organization’s size. So, getting the correct balance between organizational capability and budget is crucial. The minerals exploration sector has witnessed substantial cost inflation in recent years, with prices rising steeply in fields such as drilling services, aviation and people. He therefore sees cost control as one of his main priorities. Another is finding and retaining the experienced, highly skilled people who are needed to translate his group’s ambitious exploration plans into reality and to keep ahead of that 0.03 per cent Universal Success Curve. “My group’s raison d’être is to increase the value of the company by finding new mineral resources,” Eric Finlayson says. “That task is a lot harder today than it was three or four years ago. In 2003 Rio Tinto had a market capitalization of roughly US$25bn. Today it is above US$100bn. Adding significant value to a company that's nearly four times as big is a whole different ball game. “But we’re not going to allow the magnitude of the challenge to faze us,” he adds with a smile.

Peter Brigg is a freelance business writer based in Surrey, England.

20 Rio Tinto

Review

22862_p21

22/2/08

17:29

Page 1

The world is shaped by the boundaries of people’s knowledge at any one time. It is intriguing to discover, in a single capsule, a snapshot of exactly how the world looked to our ancestors – around the year 1768, as it happens. It was at that time that the Encyclopedia Britannica was first published and the first edition is now available in a three volume replica (Encyclopedia Britannica, £99). The replica offers hours of fascinating study, but the volumes are as intriguing as much for what is not in them as for what is. There is very little about what we would nowadays call geology or earth science, and even less about extractive sciences such as mining and mineral processing. But there are strands of truth that hold fast to this day, 250 years or so after publication.

At a moment in time Chris Morrissey explores how one publication enshrines the state of scientific knowledge, 250 years ago.

There was a hunger for scientific knowledge at that time, illustrated by huge popular interest in voyages of discovery that Captain James Cook was making in the Pacific. Cook made his first landfall on the Great Southern Continent he had been seeking in April 1770, but he did not get back to Britain till the following July so the encyclopedia does not mention Australia or the strange deer sized, hare flavoured animals (kangaroos) that Cook’s party found there. Britain’s Industrial Revolution was in full swing, fuelled by the products of many hundreds of British mines. The Parys Mountain mine in North Wales (still making news in the twenty first century) was getting into its stride as a major copper producer. The North Pennines orefield was churning out lead, and one lead mine distinguished itself by producing over 2,000 tons of contained metal in a single year. It is an insignificant amount now, but prodigious at the time. The first Encyclopedia Britannica was scrambled into print, a year behind schedule, by three enterprising Scotsmen (“a Society of Gentlemen in Scotland”). Its editor was a brilliant young polymath called William Smellie whose scholarship was matched by his fondness for roistering in Edinburgh drinking dens. The other two were an engraver, and a printer who doubled as chief salesman. About 3,000 copies were sold, at £12 for the complete work – 2,659 pages illustrated by 160 copperplate engravings. Framework The aim was to summarize the scientific knowledge of the day in a framework of long essays set out in alphabetical order by discipline – Astronomy, Botany, Chemistry and so on. Supplementing the essays were short dictionary style entries that dodged from one discipline to another. Typically, the long essay on anatomy comes straight after an entry on Anatolia and an engraving of a whistling duck. Smellie compiled the text from over 150 existing publications (“the best books on every subject”). He acknowledged his sources but suited himself on which to use and how much to extract. Some of his choices seem rather odd now. Midwifery has more pages than mechanics and electricity put together. There is no entry for Geology – it had only just been invented as a word and was yet to be born as a science. Mines, however, were considered scientific enough to deserve a page of text. A mine is defined as “a place underground where metals, minerals or even precious stones are dug up”. Minerals are “all fossil bodies . . . dug out of a subterraneous mine”. The section headed Chemistry reflects a world in which only six metals were recognized – gold, silver, lead, copper, tin and iron, plus eight so called semi metals that included platinum, nickel, cobalt and zinc. It was a hundred years before the Russian scientist Mendeleyev proposed the system of elemental classification that gave us the Periodic Table. There are some

21 Rio Tinto

Review

22862_p21

22/2/08

17:29

Page 2

At a moment in time

Wisdom There is a curious mixture of wisdom and wackiness in what the encyclopedia says about orebodies and how to find them. It would be an odd geologist nowadays who reckoned that orebodies mostly take the form of veins or lodes and are never perpendicular. On the other hand, many would agree that vein structures “. . . seem to be, or to have been, the channels through which the waters pass within the earth”. On what it takes to find ore, the work comes within hailing distance of modern views. First it says that there’s no point in waiting for “favourable accidents” like floods and earthquakes to expose ore. Instead, you have to go and look for it. To succeed in finding it requires “a particular sagacity, or acquired habit of judging from particular signs, that metallic matters are contained in certain parts of the earth”. The chief signs of hidden mineral deposits are listed in terms that foreshadow modern exploration techniques. Examples are “the discovery of certain mineral waters” (anticipating hydrogeochemical techniques) and “discolouration of trees or grass” (a prophetic reference to geobotany?). A more traditional sign is “finding of pieces of ore on the ground”; so called float searches still play a key role in discoveries. What do you do when no such signs can be found? The advice foreshadows a modern saying among explorationists – “If you ain’t drilling, you ain’t looking”. It reads: “But when no evident marks of a mine appear, the skilful mineralist usually bores into the earth, in such places as from some analogy of knowledge, gained by experience, or by observing the situation, course or nature of other mines, he judges to contain metal.” There is much wisdom in those words, and in the advice about questions that had to be asked to assess a mineral discovery. The most basic question was whether the mineral deposit could be “dug to advantage”, meaning mined at a profit. Others concerned the availability of wood and water, the healthiness of the place and its topographic position. The overall conclusion was that “the best situation for a mine is a mountainous, woody, wholesome spot”. The questions have multiplied and become more complicated since that was written, but with mineral discoveries the big question is still the same as the one asked in 1768. Can it, realistically, be dug to advantage?

Chris Morrissey is a former chief geologist of the Rio Tinto Group.

22 Rio Tinto

Review

you write

telling absences, among them manganese (first isolated 1774), chromium (identified 1797) and aluminium (named 1812 but not isolated as a metal until 1825). Notes on how metallic elements occur again reflect a knowledge base that was tiny compared with today’s. Gold is described as being found in ores of other metals but “there is no proper ore of it”. Platinum and nickel both get the same comment: “Of its ores we know nothing”. Most ores of copper are said to be “a beautiful green or blue” (in other words, coloured by malachite, azurite, and other minerals normally produced by weathering). The chief ore mineral of zinc is given as the carbonate calamine, which at that time was the main source of the impure zinc metal (spelter) used in brass making. The focus here is clearly on near surface mineral deposits, though the encyclopedia mentions that in some places deep mining had been going on for hundreds of years. Examples it gives are the silver mines of Potosi (Bolivia) and Freiberg (Saxony), the Kremnitz gold mine in Hungary, and the tincopper mines of Cornwall.

The postbag was pleasingly fat after the December issue of “Review” appeared. Most letters were appreciative, although we did receive a gentle rap on the knuckles (quite rightly) for our failure to include on the map of Rio Tinto’s Australian railway network all the places mentioned in the article. Still on the trains, a reader wrote that he could see how iron ore was loaded onto the trucks using gravity, but how do we get it off again? Well, the wagons are locked in an enormous barrel-shaped contraption called a car dumper, two at a time, which then turns them upside down. The ore shoots out on to a conveyor belt which whisks it to the shiploader, and so onto the ships. We found two letters especially intriguing, and both were triggered by our feature by Dan England that looked at mining through the eyes of novelists over the years. The first is from a shareholder, Aline Puxley, who lives near Newbury in Berkshire, England and writes about one of the books mentioned: “Hungry Hill was based on my husband’s family and Copper John was his great great great grandfather. Daphne du Maurier was billeted on Henry Puxley in Hertfordshire and read the papers relating to the copper

22862_p21

22/2/08

17:29

Page 3

Ghostly remains: Dunboy Castle, destroyed by fire in 1921.

we read

mines at Allihies in County Cork.” The papers are now in a new mining museum at Allihies – but in them Du Maurier had found the inspiration for her epic 100 year adventure story of feuding men (Brodricks v Donovans), voluptuous women, fighting and death in Ireland’s violent days. The Cornish Mining Heritage website tells how the history of the mines is inextricably bound up with the Puxley family which was of English origin with Galway connections. John Lavallin Puxley (“Copper John” in the book) formed the Allihies Mining Company in 1812 and started work at Doneen where “a quartz vein showing the telltale green signs of secondary copper staining extends into the sea and may still be seen today”. The Brodrick’s home in the book is Clonmore – in reality, Dunboy Castle where the Puxley family lived. One journalist described it as “probably the greatest house in all Ireland, mixing the styles of French chateaux and the practical sturdiness of an old English Manor”. Du Maurier did not need to invent the scenes at the end of the book when it is burned down. As in fiction, so in life: the castle was torched by IRA terrorists in 1921. It has now

been rebuilt and is reopening as a luxury hotel. There’s a further twist in Mrs Puxley’s tale. In 1950 her first cousin, Lorna ArcherHoublin, married Rio Tinto chairman Val Duncan, one of the mainsprings of the Group’s growth at that time. The other letter that caught our special attention was from Michael West, formerly chairman of Mining Journal in the UK. “I have read the December ‘Review’ with usual interest but have been surprised by an omission in the article by Daniel England. “There is a thriller about mining in Australia by Hammond Innes that should merit inclusion. However, more than that, it was all but sponsored by Rio Tinto Zinc in the early seventies at the time when Val Duncan was chairman. Hammond Innes was encouraged to go to Australia and was given considerable help in travelling around in the mining areas. “I am aware of this as it was my turn to be president of the Royal School of Mines Association in 1972 and Val Duncan was the leading speaker and Hammond Innes replied on behalf of the guests. Part of the amusement of the evening was that Hammond Innes had portrayed a Royal School of Mines graduate in Australia in a very

poor light; indeed he presented him in the book as a crook!” The book is called Golden Soak (Collins 1973, published in paperback by Pan 1996). It is a thriller set in the Pilbara mining area at the time of the great nickel adventures of the early seventies. The plot seems laboured by today’s standards but there’s lots of authentic mining detail and the climactic scenes in the scorching heat of the deserts, as the narrator searches for a missing miner, are vivid and absorbing indeed. Finally, how could we resist publishing extracts from this letter from a shareholder, Rory Darling, who lives in Oxfordshire, England? “I receive a number of similar publications which are so dull by comparison with your magazine . . . “Rio Tinto is a company that many in the UK know little about as most of its operations are abroad and your magazine is the main point of contact that small shareholders have with the organization – and your articles are always accessible for those of us who are not familiar with what the company does. “I am appreciative, and thank you for the thoughtful way you have produced a diverse and comprehensive review.”

23 Rio Tinto

Review

22862_Cover

22/2/08

17:31

Page 6