RioTinto Mar 08

Re

view

Brave new world in London W2

Return to nickel

Special supplementIntroducing Rio Tinto Alcan

Issue 85 March 2008

22862_Cover 22/2/08 17:31 Page 7

Rio Tinto

is a leading international mining groupheadquartered in the UK, combining Rio Tintoplc, a London listed public company, and RioTinto Limited, which is listed on theAustralian Securities Exchange. Rio Tinto’sbusiness is finding, mining and processingmineral resources. Major products are aluminium, copper, diamonds, energy (coaland uranium), gold, industrial minerals(borates, titanium dioxide, salt, talc), and ironore. Activities span the world but are stronglyrepresented in Australia and North Americawith significant businesses in South America,Asia, Europe and southern Africa. The Group’sobjective is to maximize the overall long termreturn to shareholders through a strategy ofinvesting in large, cost competitive mines,driven by the quality of each opportunity, notthe choice of commodity. Wherever Rio Tintooperates, the health and safety of itsemployees is the first priority. The Groupseeks to contribute to sustainabledevelopment. It works as closely as possiblewith host countries and communities,respecting their laws and customs andensuring a fair share of benefits andopportunities.

Views expressed in “Review” are notnecessarily those of Rio Tinto. Forconvenience, the expression Rio Tinto is usedto describe both Rio Tinto plc and Rio TintoLimited and companies within the Group,even though these companies are generallyseparate and independently managed.

Editorial office2 Eastbourne TerraceLondon W2 6LGTelephone +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.

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.

Re

view

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 6

4Return to nickelIn Indonesia and NorthAmerica, working towards amarket foothold for a metalincreasingly in demand. By Ralph Mills.

8Brave new world in London W2Helen Plummer explores anew Rio Tinto regional centre.

13Seven pillars oftransformationDavid Bannister looks at howRichards Bay Minerals isresponding as the winds ofchange re-shape SouthAfrica’s industry.

16A mountain to climbStatistically, the task lookstruly awesome. And, PeterBrigg discovers, EricFinlayson’s Exploration teamsneed to strike it rich toprovide a flow of new projectsfor the Group.

21At a moment in timeChris Morrissey shows howone publication enshrines thestate of scientific knowledge,250 years ago.

22You write, we readBrowsing through the editors’postbag.

+

Rio Tinto Review

Contents

One Rio TintoWith this issue, Review takeson a whole fresh appearance,adopting the Group’s newcorporate identity and colours,and using a new range ofspecially designed typefaces.The new look is beingintroduced progressivelyduring this year, providinginstant recognition, under asingle identity, of all the manybusinesses that belong to RioTinto around the world. We hope you like it.

Special supplement

Introducing Rio Tinto Alcan.

22862_IFC-p01 27/2/08 14:23 Page 61

In July 2007, torrential rain fell on the steep slopes of Morowali Provincein central Sulawesi, Indonesia. The downpour resulted in floods andlandslides that engulfed a number ofvillages, killing more than 50 people and forcing thousands to abandondevastated homes.

It was a major disaster that was littlereported in the West, but triggered animmediate reaction from Rio TintoIndonesia. The company swiftlyimplemented a relief programme that, as well as providing immediate aid, gave damaged communities long term assistance.

Rio Tinto’s interest in Sulawesi, aroughly star shaped island about thesame size as the UK that lies to the east ofBorneo, follows exploration work in theearly 2000s that demonstrated thepresence of a huge nickel deposit in thecentre of the island, enough to supportbetween 40 and 100 years of production.

This project, together with anothernickel project – Eagle, in the US – mark areturn to nickel for Rio Tinto. Though inthe past the company mined nickel inBrazil and Zimbabwe, the metal has notrecently featured in its mining portfolio.But the ever increasing appetite forquality steels in China and otheremerging economies will be ready todevour the output from both projects andtransform Rio Tinto into a world leadingnickel supplier.

In Sulawesi, that same tropical rainfallthat today can cause flooding, has, overeons, weathered the igneous rocks of thehigh plateau, both physically andchemically. The result is a mushy,waterlogged deposit called a laterite, andas the weathered rocks containedsignificant proportions of nickel, so doesthe laterite.

Nickel has been mined from laterites,notably in nearby New Caledonia, sincethe late nineteenth century. However inthe early twentieth century the discoveryof vast nickel sulphide deposits atSudbury, in Ontario, shifted the focus,and so, paradoxically, while lateritesrepresent approximately 70 per cent ofthe world’s nickel resources, at presentthey form only about 40 per cent of nickelproduction.

Nickel tolerantThe natural presence of nickel-richlaterite produces a fairly barrenlandscape characterized by stuntedrainforest and a nickel tolerant flora.Generally unsuitable for agriculture, theLa Sampala area covered by the proposedRio Tinto mining contract is sparselypopulated and environmentallyimpoverished due to the naturallyoccurring exposure of nickel laterites.

The initial exploration successes havebeen followed by a long and drawn outnegotiation process. Contract discussionshave been complicated by the location,which not only involves the nationalgovernment but also straddles tworegional administrations. Mike Jolley,president director of Rio Tinto Indonesia,explained that he and his team ofnegotiators are engaged in a race tocomplete Contract of Work agreementsbefore new legislation is introduced.

The proposed Sulawesi project, whichbecause of the nature of the deposit willbe a shallow open cut mining process,

Rio Tinto Review

4

Return to nickel

In Indonesia andNorth America,working towards amarket footholdfor a metalincreasingly indemand. By Ralph Mills.

22862_p04-07 22/2/08 13:55 Page 2

with continuous rehabilitation, isplanned initially to produce about46,000 tonnes of nickel per annum, butwith potential to increase to about100,000 tonnes. The project will involvethe construction of an access highwayand a new seaport on the east coast ofSulawesi.

“Local communities in Sulawesi andIndonesian national political parties are,naturally, excited by the economicpotential of a Rio Tinto project,” said MikeJolley. “However they might have becomepuzzled and not a little worried by aperceived lack of activity on the ground.To keep the project ‘alive’ in people’sminds, but without raising unrealisticexpectations, Rio Tinto is committed toinvesting US$500,000 in a long term,broad based community developmentprogramme that is currently beingplanned and which will take placewhatever the outcome of negotiations.

“The Morowali disaster kick startedthis concept in a meaningful way, and wecommitted US$250,000 to providing reliefin the areas affected by the flooding. We

which will re-house an entire village,involves the construction of 46 housesusing traditional designs but modernmaterials and techniques. I’m pleasedthat both projects have been well receivedby local people and by local and nationalgovernments.

“We consider the Sulawesi deposit tobe one of the best undeveloped nickelresources in the world,” concluded MikeJolley. “Once we have achieved a Contractof Work we can proceed with a feasibilitystudy. The project is likely to involvecapital costs of around US$2 billion, butwill result in significant flow-throughbenefits to both the island and nation. It

will be the first time that nickel metal hasbeen produced in Indonesia.”

Forests and lakesFor very different reasons, water is ahugely important issue in a miningproject on the other side of the globe, inMarquette County, northern Michigan.On the south shore of Lake Superior, thisis a gently rolling, densely forested, rockyenvironment dotted with lakes and lacedwith innumerable streams that tumbleover waterfalls and feed rivers inhabitedby game fish such as coaster brook trout.With moose, deer, wolves and blackbears, it’s an environment about which

Rio Tinto Review

Return to nickel

5

. . . the ever increasingappetite for qualitysteels in China andother emergingeconomies will beready to devour theoutput from bothprojects andtransform Rio Tintointo a world leadingnickel supplier.began with an immediate contribution offood, medicines, clothing and temporaryaccommodation. Rio Tinto purchased thematerials and arranged shipment toSulawesi, where the aid was distributedby teams from Tadulako University, withwhom we were already working closelyon the mining project.

“We then asked local communities andthe university what we should do next,and together we created a scholarshipprogramme that will ensure that theeducation of 50 children from floodedcommunities is not adversely affected. A second Rio Tinto funded project, againmanaged by Tadulako University, and

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.

22862_p04-07 22/2/08 13:55 Page 3

people care very much, whether they livein its midst, or hunt, hike and fishamongst its watercourses and woodlands.

Its rocks are ancient – the PorcupineMountains are the oldest in the US – andbelow the surface in the sparsely pop-ulated Michegamme township, northwest of Marquette city, lies a rich depositof nickel sulphide – Eagle – discovered in2002 by Rio Tinto.

When I spoke to the Eagle projectgeneral manager Jon Cherry in Decemberlast year he was on tenterhooks, for laterthat day the Michigan Department ofEnvironmental Quality (MDEQ) was dueto give its final decision on crucial mine,air, and groundwater discharge permits. Itwas to be the climax of several years of

effort that had resulted in an 8,000 pagesubmission from the operating company,Kennecott Minerals. The MDEQ had alsoreceived 1,000 pages of submissions fromlocal environmental organizations. Ifgranted, Eagle’s permit would be the firstissued by Michigan under its 2004nonferrous metallic mine law, consideredto be the most stringent in the US.

Looking back on this hectic period, JonCherry said: “I think it demonstratesKennecott’s concern for the environ-mental aspects of the project that insteadof following tradition and appointing amining engineer to plan the mine, theyappointed me – an environmentalengineer.”

Environmentalists had argued that the

mine would endanger nearby water-courses, asserting that “no sulphide mineis ever safe”.

“We can easily demonstrate that thatisn’t so,” said Jon Cherry. “Over the borderin Wisconsin, Kennecott operated the 180acre Flambeau copper mine right next tothe Flambeau River for five years withouta single environmental incident. Thatmine has now been closed for ten yearswithout any further incident, and we’vejust received a Certificate of Completion,which means that we’ve fulfilled all ourobligations and have been refunded 80per cent of our bond, the largest amountallowed.”

The orebody at Eagle is approximately300m from top to bottom, and Jon Cherry

Rio Tinto Review

6

Because the mine will have such a small footprint, localscan continue to use

the areaforrecreation, and afterit isexhausted,nothing

will remain on thesurface.

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).

22862_p04-07 22/2/08 13:55 Page 4

explained that it will be minedunderground using long hole stoping, aprocess that involves infilling excavatedchambers with cement and waste rock asmining proceeds, starting at the bottomof the orebody. No waste rock will be leftat the surface after closure, as it will all beconsumed during the backfill process.The orebody will be reached by a longinclined tunnel that will minimize anyrisk of interference with the nearbywatercourses. Extracted nickel ore will beshipped to a local mill and then, inconcentrated form, to Canada forsmelting and refining.

Because the mine will have such asmall footprint, locals can continue to usethe area for recreation, and after it isexhausted, nothing will remain on thesurface.

Jon chuckled as he explained that thetreated water from the mine will have tobe stored in holding tanks to prevent theentry of rainwater before it is releasedinto the environment. “My treated wateris allowed to contain only two nanogramsof mercury per litre – that's parts pertrillion – but Michigan rainfall alreadycontains 20 nanograms of mercury per

litre – I can’t let them mix! The treatedwater will be of better than drinkingwater quality.”

Ironically, Eagle’s engineeringchallenges are relatively simple from amining point of view, but complexenvironmental issues have meant that JonCherry has spent a lot of time and effortliaising with local communities andorganizations. “It’s been important to usthat we’ve listened to and addressedpeople’s concerns, and we will continueour efforts to engage with residents as theproject moves forward.

“From a personal perspective I’ve beeninvolved with environmental issues forthe last 18 years. In my previous roles myjob involved the remediation ofenvironmental legacy issues at existingmines. Eagle was an opportunity to takeon the design of a greenfield project andto do it right from the outset, using whatwe have learned from the past. It was anopportunity I couldn’t pass up.”

Later that day the MichiganDepartment of Environmental Qualityissued the three permits for which Jonhad been waiting. His reaction: “This isgood news not only for Kennecott, but

also for job creation, building a strongereconomy, and providing additionalopportunities for area businesses to grow.We are very pleased that our efforts overthe last several years to work withregulators and many parties in thecommunity to develop a good, environ-mentally responsible project have beenrealised. We look forward to getting theproject under way.”

Commenting that the publicinvolvement had been a positive factorand had helped his organization “beef up”some aspects of the permits, an MDEQspokesman pointed out that: “The realityis that this review process is one of themost rigorous that’s ever been doneprobably in any state in the nation for aproject like this.”

Rio Tinto will invest some US$300m inthe Eagle mine, which will become theonly primary nickel mine operating in theUS. Construction work will begin thisyear, with ore production starting in2009. The mine is targeted to produceabout 16,000 tonnes of nickel per year forseven years.

When he heard that the permits hadbeen granted, Bret Clayton, Rio Tinto’schief executive, Copper, commented:“Eagle gives Rio Tinto a valuableopportunity to enter the market fornickel, demand for which is risingstrongly led by the development of newinfrastructure in developing economies.

“In ten years’ time, Rio Tinto couldrank among the top nickel producersglobally.”

Ralph Mills is a writer and archaeologistbased in Nottingham, England. For anabsorbing depiction of life in Upper Michiganwhere the Eagle project is located, see thecrime novels of Henry Kisor – especially“Venture into murder” which includes someinteresting mining background alongsideseedy goings on at a disused copper mine.

Rio Tinto Review

Return to nickel

7

Not just for nickelodeons

Nickel is almost always used inalloys with other metals, the mostfamiliar of which is stainless steel.While its most dramatic usesinclude replacement joints,surgical instruments and heartstints, it has many more run of themill applications in pots and pans,in aeronautics, in motor vehiclesand computers, and in hydrogenfuel cells. Alongside the five centUS “nickel” coin, the metal is alsoused in other coinage, includingthe Euro.

22862_p04-07 22/2/08 13:56 Page 5

Rio Tinto Review

8

Brave new world

in London W2Helen Plummer explores a new Rio Tinto regionalcentre.

22862_p08-12 22/2/08 14:01 Page 2

Walk through the glass doors of No. 2Eastbourne Terrace, London W2 and youare entering the bricks and mortarembodiment of a new brand and workingethos for the global business.

Significantly, the airy ground floorreception area – and every floor of thedetached corner site building – istransparent, with floor to ceiling windowsflanked by thin strips of pure white careralimestone and aluminium. Frequentvisitors to the organization will not fail tonotice the contrast with the rather moreopaque, somewhat inscrutable, exteriorof the Group’s former long term Londonhome, 6 St James’s Square. Left behind isthe dark wood panelling and imposingformality of the entrance hall to No. 6.Instead, white flooring and natural lightprovide emphasis for the polishedaluminium blades which rise up at anglesfrom the floor all over the double heightfoyer and provide anchorage forsuspended glass boxes of artfully litmineral samples. On the far walls,contrasting geometric strata panelsrepresent different metals – copper, zinc,iron. The effect is dramatic andcontemporary, spelling out the messagethat this office houses a thoroughlymodern mining company.

Here, the visitor is greeted by the smellof freshly ground coffee and a sleek lowlevel reception desk, set back from theentrance. The impact is of a professionalbut unimposing welcome, with an arrayof reception, work and social facilities.

To the right is a circular arrangementof computer terminals that resembles thecontrol panel of Dr Who’s tardis, wherethe first time guest is asked to runthrough an audio visual presentation onsite health, safety and etiquette.

Over on the other side, relax with acomplimentary cappuccino from thefoyer’s high street style coffee shop on aninviting mix of seating; choose fromstylish easy chairs in white leather ornoodle bar type benches and tables. Orsettle in to the red wifi visitors’ station –arrive early for your meeting, plug in andcheck on your emails.

This is Rio Tinto’s Paddington Regional

Centre, the Group’s new European base,and workplace for 550 people broughttogether under one roof from St James’s,and offices in Chiswick, Guildford andBristol. The “brave new world”description is that of Neil Usher, generalmanager – Group Property. “We wantedthis to be a building that speaks to you,that is lively and buzzy,” he says. “StJames’s was a very traditional office, acorporate statement. This move hasallowed us to create a much moreaccessible working environment thatencourages fully collaborative workingand reflects the new Rio Tinto brand.”

Gone are the hushed corridors,individual offices and intimidating closeddoors of St James’s. Pass from reception tothe core of the building here inPaddington and you are thrust into abustling, animated environment. Eachfloor is completely open. Workstations –not in rows, but with layouts that allowfor both collaborative and individualworking – are grouped together, with noapparent delineation of status. These arepunctuated by curved wall meeting“capsules”, designed for either one on onediscussions, or individual “telebooths”, forconfidential phone calls or quiet worktimes. To avoid “camping out” in theserooms, which are not bookable andavailable on a spontaneous “drop in”basis, there is no power source – so anindividual can only work in there for aslong as the battery on his or her phoneand laptop will last.

The open staircase (there are lifts, butall are encouraged to use the stairs asmuch as possible) passes through the“mix area” of each floor. It is in thesesections, each kitted out with acontemporary look kitchen area and caféstyle tables, where staff can preparedrinks, catch up on newspapers andprofessional journals, monitor thefortunes of the FTSE on the plasmascreen, or hold informal meetings ordiscussions with colleagues.

Outdoor work And, British climate permitting, thebuilding offers Rio Tinto people withsomething quite unusual for centralLondon — outdoor work space. Three of thefloors open out onto large, curved terraces,attractively landscaped with ornamentalgrasses, sustainable wooden seating andtables.

There are also bigger, enclosed areasfor “meet ins” (internal meetings), “meetouts” (external meetings) andbrainstorming (write-on white walls, barstools and easy chairs). Even thereception area and the restaurant on thesixth floor can be used as venues forinformal meetings.

Rio Tinto Review


9

22862_p08-12 22/2/08 14:01 Page 3

“We have at least ten different types ofwork space in the building,” explains NeilUsher. “We wanted the environment to beas flexible as possible, to allowcollaborative working and greatercommunication, whilst accommodatingthe need to be able to work quietly andconfidentially as well. People may chooseto move between different work spacesaccording to the type of work they aredoing at any one time.”

Occupying a corner site and beingentirely detached, 2 Eastbourne Terrace isroughly square shaped, but with fiverounded corners. The impact of this onthe interior, coupled with the layout, andcurved walls of the capsules and pods, isthat it feels like a circular space. This issomething which Neil believesencourages “energy flow”. “Introducestraight lines and you lose energy,” he

says. “And this way, we’ve avoided havingany corridors, circulation space isintegral.”

Circulation space is vital to the newbusiness culture; no one should feelchained to their desk. It is intentional toothat the staircase is not tucked away toone side, but that it threads through thehub of the working areas, encouragingpeople to meet in passing, to integrate,communicate, collaborate. It’s what’sknown in the trade as “forced collision”.

Graphic reminderInterior curved walls, stairwells andmeeting areas are decorated with giant,dramatic images of Rio Tinto locationsand products, printed directly onto thewall in vinyl for durability. There’s nocorporate art collection here, rather a“graphic reminder of who we are”,

according to Neil. And with a number ofpreviously dispersed functions comingtogether in one location, he believes thatit will bring people closer to the corebusinesses. “It won’t be unusual here, forexample, to bump into a geologistbrandishing a mineral sample,” he says.

Everyone based in the building has adesignated workstation, but the idea isthat anyone can work anywhere in thebuilding. Wifi access is everywhere, evenon the outdoor terraces. Workstations areentirely flexible, deliberately so. Allemployees have laptops, which slide on toa pedestal-mounted dock below the desktop. Phones, also on a mounted shelfabove the desk, are on a “follow me”system – work in any area of the building:log in and the phone in front of youbecomes yours. Coats and jackets arehung in central cupboards, not slung on


Rio Tinto Review

10

Everyone based inthe building has adesignated desk, but the idea is thatanyone can workanywhere in thebuilding. Wifi access is everywhere,even on the outdoor terraces.Workstations areentirely flexible,deliberately so.

22862_p08-12 22/2/08 14:01 Page 4

the backs of chairs; desks are cleared atthe end of every day, with papers lockedaway in pedestal units and filingcabinets. The only items left out arekeyboard, monitor, mouse and phone.

The aim is not to create some sort of“Big Brother” style regime, but to preserveconfidentiality at unattended work-stations and to ensure usable spare desksare available for visitors.

Reactions to working in this way havebeen, so far, highly positive. People in thebuilding have embraced the new culturereadily and proved their adaptability. Forthe switchover from St James’s Square inDecember, packing took place on a Fridaybefore the weekend move; by 12 noon onthe Monday every crate was unpackedand work had resumed.

The speed of the operation wasundoubtedly facilitated by a nine month

campaign led by Rio Tinto’s relocationteam before the move to reduce theamount of paper used and stored by theGroup. Swathes of paper based materialwere reviewed. Required data was storedelectronically before the paper itself wasrecycled. All were encouraged to thinkdigitally wherever possible and changehabits where paper use was concerned.The aim in the new workplace is for atleast a 25 to 30 per cent reduction inpaper use. There are no waste bins byworkstations; staff take all material tocolour coded recycling bins (confidentialpaper; dry recycling including bottles,cans and plastic; wet waste) in the mixareas. The idea behind this is that if youhave to dump waste elsewhere, you willthink twice before generating it in the firstplace.

All those who work in the building

have been issued with the OneCard,which besides its function as a securitypass and eligibility for lunch in the inhouse restaurant, acts as a licence to usethe shared multifunctional devices for allprint, copy, scanning and fax needs. Onceyou’ve pressed “print” on your laptop, youneed to visit the nearest printer to useyour OneCard and release the paperwork.Anything not printed out by midnightthat day is automatically cancelled –doing away with those piles of documentsthat often languish uncollected in theprinter tray. High speed quality scannersare available in all the central resourceareas to help keep paper to a minimum.Photocopiers are set by default to blackand white.

Saving paper Nowhere was the drive to reduce papermore key than in the new Informationand Resource Centre, a phone free havenon the lower ground floor, where theoriginal five libraries spread across theBristol, Guildford and St James’s officeshave come together – a Herculean taskthat involved reducing over 1,000 linearmetres of reference material by over half.Now available to all UK employees, whocan chose to work inside, or outside in its landscaped patio area, this is thecentral resource for publications andsubscriptions in the region, thusconsolidating costs and cutting thenumbers of journals imported to theorganization.

“The new building has given us thechance to challenge everything,” saysSean Jones, Facilities manager. “We’ve

Rio Tinto Review


11

Aldermanbury Square

The new working environment ofthe Paddington regional centre ismirrored in microcosm by RioTinto’s corporate office at 5Aldermanbury Square in the Cityof London, whence a lean team of50 people who work on corporatedevelopment and strategyrelocated late last year.

This 1,450sq.m space is on thetwelfth floor of a brand newlandmark development and offersall the same workplace amenities,including a small restaurant and arange of meeting and supportareas.

“The office at AldermanburySquare will provide a first classplatform for our interface with thefinancial community and excellentfacilities for engaging with visitingstakeholders,” said chief executiveTom Albanese of the move.

22862_p08-12 22/2/08 14:02 Page 5

looked at every aspect of office life andrethought the environmental impact ofwhat we do.” This really does meaneverything: stationery, 63 per cent ofwhich is now from recycled materials;corn starch coffee cups; the eco friendlyrange of cleaning products used by thecontract cleaners; desk chairs andflooring, made almost entirely fromrecycled matter.

All unwanted furniture and equipmentfrom the old offices was either dispatchedfor use in other Group locations or sent to Greenworks, an organization whichrecycles or resells ex-office furniture.Nothing went to landfill.

Take lunch in the Clove restaurant onthe building’s top floor, a chic, light filledspace with views over the London skylineand the option of an outdoor terrace, andyou could be forgiven for thinking you’dwandered into some smart West Endeatery. On the menu here are healthy,plated hot meals and sandwiches made asfar as possible from locally sourcedproducts, with “food miles” kept to aminimum.

Transport links Since transport links for the premises aresecond to none – it’s a stone’s throw fromPaddington railway station, with itsUnderground and bus connections, allare encouraged to use public transport totravel to and from work or betweenmeetings.

It goes without saying that theworkplace is fully geared up with state ofthe art video conferencing, thus reducingthe requirement for air travel, but therewill inevitably still be some need foroverseas traffic. Rio Tinto visitorslanding at Heathrow can hop on theHeathrow Express, which runs to andfrom Paddington station. Those whoarrive long haul, jaded and jet lagged inthe early hours, can check into one ofthe building’s two guest suites, openbetween 5am and 11am and equipped aswell as any hotel room, to catch up onsome sleep and take a shower beforemeetings.

“We’ve taken a holistic approach,” addsSean Jones. “It’s no good having an officebuilt and running to the highest ofenvironmental standards, if the people init are not operating in that way too.”

The building itself fulfils the moststringent of environmental criteria.“We’ve got very advanced buildingmanagement systems,” explains NeilUsher, “making the office as efficient aspossible in terms of heating and cooling.There are intelligent lighting systems, sothat lights do not stay on when there isno need for them, energy efficient bulbsand presence detectors on all the taps.”

Despite the limited availability ofrenewable energy on a commercial scale,the building’s electricity is entirelysupplied by the energy company Npowerfrom renewable sources – wind power,along with other means including the co-firing of biomass and hydropower.

Energy efficientRussell Durling of the building’s originaldeveloper, Derwent London, explainsthat the mix of stone and glass thatgraces the exterior is carefully designedto follow the path of the sun. “Because ofthe structure’s prominent corner plotposition,” he says, “we designed it so thatit is about 40 per cent solid and thepatterning of stone versus glass variesacross the structure to mask the sunwhere it is at its highest in mid summer.This means less solar gain and is moreenergy efficient.”

Down in the engine rooms of thebuilding is Sean Jones’ pride and joy – arainwater harvester tank. Water collectedfrom the roof is used to flush thebuilding’s toilets. As far as Sean knows,there is only one other such in acommercial property in central London –at the O2, the former Millennium Dome.Sean also has high hopes – yet to berealized – of installing a wormery fororganic waste from the restaurant.

All this adds up to the high rating offour out of five on the BREEAM scale – anenvironmental assessment method thatcan be applied to new and existingbuildings. “It’s pretty much as good as youcan get in central London,” explains Neil.“If we were on a greenfield site, then wemight have been able to achieve an‘excellent’ rating, that is five out of five,but there are some limitations imposedby our location – it’s just not practical tohave a bio-mass fuel boiler in centralLondon, for example. Getting a ‘verygood’ ranking is quite an achievement.”

It’s one of many achievements chalkedup at the Paddington Regional Centre,but no one is resting on their laurels.With this site and the new corporateoffice at Aldermanbury Square in the Cityof London up and running, there is now ablueprint for other new Rio Tinto regionalcentres around the world – Brisbane,Perth, Salt Lake City, Montreal andpossibly other locations will all follow thismodel. “Paddington has set a globalworkplace standard and established avery different business environment,”says Neil. “This is the first in our global‘brave new world’.”

Helen Plummer is a freelance writer based inOxfordshire, England.


Rio Tinto Review

12

Clove

It’s one of the first things visitors tothe Paddington Regional Centre willnotice – a 7m high abstract sculpture,loosely based on a tree. The work ofsculptor Bryan Kneale, “Clove”stands outside the building in a pavedarea to the east, flanked by livetopiary. The choice of materials,stainless steel in a combination ofhighly polished and matt satinfinishes supported by a copper“trunk”, is clearly no coincidence.All new buildings in London areobliged to display a piece of publicart, but the developer’s originalproposal of two glass statues to beerected in the entrance did notaccurately reflect Rio Tinto’sbusiness, so the Group commissionedits own work. Neil Usher explains,“We wanted a landmark that wouldbe seen as a valuable addition topublic art in the capital and woulddemonstrate our appreciation ofcontemporary British sculpture.” Itstitle has lent a brand name to thebuilding’s Clove coffee bar andrestaurant.

22862_p08-12 22/2/08 14:02 Page 6

Pro

fileRio Tinto Alcan:we have lift off!

Supplement to Review magazineMarch 2008

22862_Cover Supplement 22/2/08 14:18 Page 7

Rio Tinto ReviewEditorial office2 Eastbourne Terrace London W2 6LGTelephone +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.

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.

Pro

file

Tom Albanese, Rio Tinto’s chiefexecutive, welcomesyou aboard for thisspecial supplement Welcome to this special supplement of Review,covering our much enlarged aluminiumproduct group, Rio Tinto Alcan.

Shortly after Rio Tinto’s acquisition of Alcanwas completed last October, Dick Evans, thechief executive of Rio Tinto Alcan who isinterviewed on pages 8-13, took me on a visitto Alcan’s operational heartland north ofMontreal in Canada.

I was really impressed. The Saguenay-Lac-St-Jean region is an area with a catchmentbasin the size of Switzerland. Its network offast flowing rivers and man made lakes feedsinto a hydroelectric system of six powerstations whose maximum production capacityreaches more than 2,680 megawatts of cleanelectricity.

This sustainable power source is the key tolow cost production at four aluminium

smelters clustered within easy reach oftidewater on the St Lawrence seaway. The region represents an industrial complex that cannot be duplicated andsomething which in anyone’s definitionmakes it a first tier set of assets in thealuminium industry today. And this is justpart of Rio Tinto Alcan’s strong set ofaluminium assets.

The integration with Alcan is going well. Itadds five bauxite deposits, five aluminarefineries, 22 aluminium smelters, and 12power generating facilities to Rio Tinto’scomplement of one mine, two alumina plants,four smelters and one power facility. We arenow confident in raising our target ofachieving synergies of US$940m a year inoperating cost savings, starting with the fullyear 2009.

Besides giving you an in depth overview ofthe largest and most exciting expansion of RioTinto’s asset portfolio to date, this supplementhighlights opportunities created by bringingAlcan into the Rio Tinto Group and thepotential for continued strong growth in thealuminium sector.

In the following pages our writers give you aprofile of the original Alcan, its successor Rio Tinto Alcan, an overview of the mineralresources that underpin our production ofaluminium, the advanced technology involvedin producing it, and a gallery of pictures of theoperations that now form part of Rio Tinto’sglobal outlook.

We hope you enjoy this first class seat foryour visit to the new Rio Tinto Alcan.

Rio Tinto Alcan:

we have lift off!

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 27/2/08 16:52 Page 6

4Come fly with usHugh Leggatt is tour leader,explaining how Rio TintoAlcan pushes out the Group’sboundaries around the globe.

8Meet the skipperPeter Brigg talks to DickEvans, the man who heads RioTinto Alcan, now the world’sbiggest aluminium business.

14Down to earthChris Morrissey focuses onbauxite, the underlyingcompound from whichaluminium is derived.

18Reach for the skyJulian Cribb reports on howthe formation of Rio TintoAlcan has united the world’stop metallurgical R&D teamsin a worldwide drive to makealuminium the twenty firstcentury’s greenest metal.

21Bird’s eye viewStepping back to look acrossthe years is Mike Reilly,reflecting on over a century ofAlcan history.

Rio Tinto Alcan Profile

Contents

22862_IFC-p01 Supplement 22/2/08 15:51 Page 61

Rio Tinto acquired Alcan Inc on 23October, 2007, in the biggest miningindustry transaction so far, forming acombined aluminium business nowknown as Rio Tinto Alcan, one of RioTinto’s five product groups.

Rio Tinto Alcan comprises a set of highquality, integrated aluminium businesseswith a global reach encompassing everycontinent. On a world map showing RioTinto’s operating locations, Rio TintoAlcan brings more dots clustered ineastern Canada, more mines and smeltersin the UK, Europe and Africa. From northand south, Iceland and eastern Brazil jointhe line up, and Rio Tinto has its firstoperation in China, a smelter inQingtongxia.

Rio Tinto Alcan comprises 25aluminium smelters in 13 territories(including joint ventures), largely inOECD countries. Crucially, the productionbase contains many of the world’s mostmodern and low cost smelters, fitted outwith Rio Tinto Alcan’s industry-leadingAP (Aluminium Pechiney) Seriestechnology.

In terms of production, Rio Tinto Alcanis number one globally in the rawmaterial bauxite (capacity 34.8 milliontonnes per year) and aluminium (capacity4.1 million tonnes per year). In alumina –the intermediate product refined frombauxite and smelted into aluminium –

Rio Tinto Alcan is number four globallywith a capacity of 9.1 million tonnes perannum. With expansions in aluminaproduction under way, Rio Tinto isexpected to become the leader in thiscommodity as well. There are plans todouble current alumina production by2015.

Rio Tinto Alcan is also a leader inaluminium industry technology which,combined with access to large andsustainable hydroelectric generatingcapacity, constitutes a significantcompetitive advantage of increasingvalue in a world in which carbonemissions are expected to be constrainedto combat global warming.

The combined group also has a strongproject development portfolio with six


4

COMEFLY WITH USHugh Leggatt is tour leader,explaining how RioTinto Alcan pushesout the Group’sboundaries aroundthe globe.

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.

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.

projects planned or under way in bauxiteand alumina and eight more inaluminium. Smelter upgrades are plannedin Quebec and British Columbia, Canada.In addition, new greenfield developmentsare at various stages in South Africa,Oman, Abu Dhabi, Malaysia and SaudiArabia.

Rio Tinto Alcan is currently organizedinto four business units: Bauxite &Alumina based in Brisbane, Australia;Primary Metal based in Montreal,Canada; and Engineered Products andPackaging, both based in Paris, France. Atthe time of the acquisition, Alcan hadannounced plans to divest the Packagingdivision. Subsequently, Rio Tinto said itwould explore divestment of EngineeredProducts to focus on upstream mining

Copper 40% Copper 30%

DownstreamAluminium 7%

UpstreamAluminium 25%

Iron Ore 23%

Energy 8%Diamondsand Minerals 7%

Iron Ore 30%

Energy 11%

Canada 13%

Other 6%

Australia/NZ58%

US 23%

Other 4%

Europe 14%

Canada 26%

US 16%

Australia/NZ 40%

Aluminium 10%

Diamondsand Minerals 9%

Rio Tinto (US$12.6bn) Rio Tinto & Alcan (US$6.5bn)

Rio Tinto (US$23.4bn) Rio Tinto & Alcan (US$44.1bn)

22862_p04-07 Supplement 27/2/08 15:14 Page 2

A thoroughly modern metal

Aluminium is a modern metal and one ofthe most versatile and thus in demandfrom all quarters. Almost everyaluminium product can be profitablyrecycled repeatedly without loss of metalquality. Recycling aluminium uses onlyfive per cent of the energy needed toproduce the primary metal from bauxite.Its light weight and strength make itideal for automobile engines andbodywork, as well as shipbuilding andaircraft manufacture. In the home thenon corrosive properties and ductility ofaluminium make it ideal for doors,window frames, roofing and insulation. Itmakes convenient packaging material asaluminium foil, drink cans and wrap.Because it is a good conductor ofelectricity, aluminium is used in themanufacture of electrical wire andtransmission cable.


5



6


The team leaders

In October last year, Rio Tinto Alcanappointed its senior managementteam when the product group wasformed. The leaders of its businessunits were named as:

Steve Hodgson (formerly Rio TintoAluminium): president and chiefexecutive officer, Bauxite & Alumina,with responsibility for bauxite mines,alumina refineries and specialtyalumina businesses worldwide,headquartered in Brisbane.

Jacynthe Côté (formerly Alcan):president and chief executive officer,Primary Metal, with responsibility forall primary metal facilities and powergeneration 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 byIlene Gordon (formerly Alcan) aspresident and chief executive officer,headquartered in Paris, France.

Executive staff functions are led by: Phillip Strachan (formerly Rio TintoAluminium), Finance, alsoresponsible for Business Planningand Analysis, Information Systems &Technology, and BusinessImprovement, as well as being co-leader of the Rio Tinto Alcanintegration team with Jean-

Christophe Deslarzes (formerlyAlcan) in Human Resources, who isalso responsible for Health, Safetyand Environment (HSE). As seniorvice president, BusinessDevelopment, Sandeep Biswas

(formerly Rio Tinto) is responsible forbusiness development in theupstream business units, technologysales, growth, and product groupstrategic alliances and investments.Corey Copeland (formerly Alcan),Communications & ExternalRelations, will also be responsible forGovernment Relations andSustainable Development. Pierre

Chenard (formerly Alcan) leads thelegal function as vice president andsenior counsel. Oscar Groeneveld,who was previously chief executive ofRio Tinto Aluminium in Brisbane, isleaving the role after being an adviseron integration through the transitionperiod.


Come fly with us

7

and processing activities. The combined aluminium

business is expected to yieldUS$940m a year in operatingsynergies. For example, in Australiacomplementary assets are beingcombined, such as the giantWeipa/Ely and Gove bauxitedeposits located on the Gulf ofCarpentaria, aligned withprocessing facilities in Gladstone,Queensland.

The alumina refinery at Gove inNorthern Australia is currentlypowered by fuel oil. Leveraging RioTinto’s experience at Yarwun inGladstone, where a gas firedcogeneration facility will beinstalled in the expanded refineryunder construction, Gove could beconverted to an alternative energysource. Gove has limited reserves;however, Weipa bauxite couldeventually be processed by therefinery which could lengthen itsoperating life.

The concentration of threealumina refineries in north eastAustralia presents significantprocurement opportunities for suchraw materials as caustic soda. Thereare also savings available globally inresearch and development,procurement, financial and fiscalintegration and typical corporateand other overheads.

Global aluminium demand isgrowing strongly, at an expectedrate of five to six per cent each yearto 2011. In 2007 it increased by tenper cent, its fastest rate in recenthistory, with China accounting formost of the growth. Besides strongChinese consumption, increasedmarginal costs of Chinese supplywill continue to support prices.

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


Born and raised on a cattle ranch in Oregon, Dick Evans mighteasily have become a cowboy. With his tall, rangy frame and LeeVan Cleef moustache he would certainly have looked the partroping steers and riding herd. But instead he elected to follow avery different career path, taking an engineering degree and thenjoining the aluminium industry. Now, after nearly 40 years in thebusiness, Evans finds himself heading Rio Tinto Alcan, the world’sbiggest aluminium business.

The period leading up to and immediately following thecompletion of Rio Tinto’s acquisition of Alcan in November was aparticularly demanding time for Alcan’s former CEO, but themonths ahead look no less challenging, as he plans and imple-ments the integration of the two companies’ aluminium interests.

The integration process is not an activity Evans comes to as astranger. In his days at Alcan he was responsible for overseeing themerging of the company with the Swiss based Algroup, acquired in2000, and then, in 2003, for Alcan’s acquisition of the Frenchcompany Pechiney, the world’s fourth largest producer ofaluminium products.

Even before the ink was dry on the Rio Tinto deal, Evans wasshuttling between the various plants in the expanded Aluminiumgroup, familiarizing himself with Rio Tinto’s facilities and meetingthe people who would help form his new team. Likewise, Rio Tintopeople have been getting to know their new Alcan colleagues, withteams of six to eight people from both sides visiting each smelterand refinery, exchanging ideas and discussing best practice. Therehas already been a lot of movement between Montreal andBrisbane, in both directions, and Evans expects this crossfertilization to continue and intensify.

“I have become a great believer in the people side ofmanagement,” he avers. “In my early days as a manager, myapproach probably echoed my training as an engineer – it tendedto be analytical and numbers oriented. Over the years, though, mymanagement style has evolved and mellowed. Nowadays I’m muchmore informal, participative and, I hope, ‘transparent’.

“When I say ‘My door is always open’ I really mean it. I welcomepeople stopping by to give me the benefit of their thinking,

regardless of their position inthe organization. And, thanks toemail, employees now haveaccess to the chief executive nomatter where they may be in theworld.”

Evans explains that to helphim direct the merging of thetwo companies’ aluminiuminterests he has set up a toplevel integration office,composed of one seniorexecutive from Rio Tinto andone from Alcan. This officeoversees the activities of asmany as 40-50 teams made upof talented experts from bothsides, 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 integrationsuccessful,” he says. “For example, there’s a bauxite-alumina teamand a smelting team. And we have a finance team, a technologyteam, a business resources team – then within each broad teamthere are special teams.

“Basically, all of them have two main tasks. The first is todevelop a transition plan that will bring the two organizationstogether successfully. This covers everything from making sure thatthe two email systems hook up correctly to being clear about who’scalling on customers. They’re looking at the organizational


8

MEETTHE SKIPPERPeter Brigg talks toDick Evans, theman who headsRio Tinto Alcan,now the world’sbiggest aluminiumbusiness.

. . . first is to develop a transition planthat will bringthe twoorganizations togethersuccessfully.


structure and how it should be staffed and at how we close thebooks. Really, all the basics of running the business, making surewe have a slick, smooth running operation from day one.

“Their second task is to identify the synergies that can beharvested from the merger. Before the deal went through, Rio Tintoestimated that some US$600m a year of benefits would beachievable. Now that all the books are open and we’ve been able totake a closer look, we think that figure will be at least 50 per centbetter. In other words, well over US$900m after tax should bepossible, perhaps more. So there’s a huge prize to be won and theintegration teams have the job of making sure we claim it.”

Dick Evans speaks interestingly about the similarities, and thedifferences, between Rio Tinto and Alcan. “Seen at a high level, theculture in the two companies is very similar,” he says. “Both sethigh standards in terms of their values, ethics and code of conduct.Both strive to be leaders globally in sustainable development andbusiness practices. Both have excellent reputations and over thepast few years have worked hard to enhance their performance.”

Such differences as there are, says Evans, stem from the twocompanies’ distinctly different roots. “Rio Tinto’s corporate cultureowes much to the company’s origins as a mining company,whereas the aluminium business is more of a high tech processingindustry. You have only to look at the exploration function to seethe truth of this. Rio Tinto has about 950 people on theexploration side. In Alcan we had five. Conversely, Alcan had wellover 1,000 people involved in processing technology; Rio Tinto hasfar, far fewer.”

Evans also points to the aluminium industry’s heavydependence on electricity. “At Alcan we generate more than halfof our electricity needs, often operating where there are trapped‘pockets’ of electricity – places like Iceland, which is rich in hydroand geothermal energy but, because it’s stuck in the middle ofthe North Atlantic, can’t export the electricity directly. So itimports alumina and exports finished aluminium. In fact youcan think of aluminium as solidified electricity.”

In amalgamating the RioTinto and Alcan aluminiumbusinesses there have been few,if any, surprises. “Huge thoughthe aluminium industry is interms of capital invested andvolumes mined and processed, itis dominated by a relativelysmall number of players,” Evanssays. “When you’ve spent alifetime in the business, as Ihave, you get to know not onlyyour competitors’ physical assetsbut the people too.

“And at Alcan we hadespecially close links with RioTinto, both through our sale tothem of our smeltingtechnology and also throughour joint ownership of

Queensland Alumina in Australia. Not only that, I spent 27 yearswith Kaiser Aluminum, which was the original co-owner ofComalco with Rio Tinto, so I was already familiar with many ofRio Tinto’s aluminium assets.

“All this makes bringing the two aluminium businesses togethereasier than you might think – though that, of course, is not tominimize the many hurdles we have to get over.”

Hurdles, however, have never been a problem for Dick Evans. Inhis younger days he was for several years ranked in the top 20nationally in the 400 metre hurdles and attended college on asports scholarship.

“I’ve always been keen on sport,” he says. “I played a lot of


Meet the skipper

9

. . . second is to identify the synergiesthat can beharvested fromthe merger. . . there’s a hugeprize to be won!


basketball and tennis at college and over the years I have enjoyedplaying squash and golf at a fairly competitive level. Nowadays, Idon’t have as much time as I’d like for those two games and Imainly get my exercise through cycling and walking.”

In such leisure time as he does get, Evans enjoys fly fishing andat one time he held the world record for the largest Dolly Vardentrout ever landed (19lb 8oz). He is also something of a collector – ofantique prints and also of archaeological artefacts such asarrowheads.

In the last five years he has rekindled his interest inphotography. “My work takes meto some fabulous places foroutdoor photography,” he says.“Brazil, Australia, Iceland, Omanand Africa, for example. So mycamera is never far from my sideand I hope soon to publish abook of my work.”

Looking back on his career todate, Evans has particularlygood memories of the four yearshe and his wife, Gretchen, andtheir two daughters spent inGhana in the late seventies andearly eighties. It was, he says,quite a contrast going directlyfrom the rarefied academicatmosphere of StanfordGraduate Business School inCalifornia, where he had justtaken a masters degree, toundertaking his first linemanagement job with KaiserAluminum, running a largesmelter in the steamy heat ofWest Africa.

“These were troubled timesin Ghana,” he recalls. “We sawthree military coups during ourtime there. And the smelter wasbeset by a host of problems –power outages, maintenanceand security problems, highexpatriate turnover – in fact justabout every operating problemyou can think of. On top of that,there was intense politicalpressure to push ahead with theprogramme of advancing Ghananationals within themanagement structure.

“But it was a fantastic experience and I learned one thing inGhana which has been important throughout my career: namelythat in developing countries you can establish world classoperations without compromising your standards. If you set aleadership example, people will follow – in some cases better thanin the developed countries. In Ghana we took the most troubledplant in the Kaiser Aluminum smelting system from bottom of theheap to ‘Best in Class’ – best not just on operating efficiency butbest on safety too.”

In fact, so highly regarded was Dick Evans by the Ghanaiansthat they twice made him an honorary tribal chief – once when heleft the country in 1982, and again in 2005.

Evans resigned from Kaiser in 1996 because he was convincedthe company was on the wrong course financially after a highlyleveraged buy out: he thought that sooner or later it would go bellyup. And so it proved when Kaiser eventually went into bankruptcy

Meet the skipper


10

. . . you canestablish worldclassoperationswithoutcompromisingyour standards.If you set aleadershipexample,people willfollow . . .

Operations in progress at the

Alma Works, Quebec, Canada,

pictured above from the air.

The potroom (right) is where

the aluminium is produced.



11

An integrated production chain for aluminium

With five bauxite deposits, five alumina refineries, 22 aluminium smeltersand 12 power generating facilities added to Rio Tinto’s complement of onemine, two alumina plants, four smelters and one power station, Rio TintoAlcan is the world’s largest producer of bauxite and aluminium. It plans toexpand its refineries to become number one in alumina production as well.



12

Above, cable storage, Lapointe Works, Jonquiere, Quebec, Canada.

Right, cable plant, Saint-Jean-de-Maurienne, France.


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 outstandingpeople, was a tough one,” he adds. “In the end, though, it turnedout well for me.

“I joined Alcan because I thought it had great potential whichhad not yet been fully exploited. I caught the company on the cuspof dramatic change, just as it was about to triple in size throughthe acquisition of Algroup and then Pechiney.”

Dick Evans made rapid progression through Alcan’s ranks andin 2006 was appointed its CEO.Now, as chief executive of RioTinto Alcan, he is responsible foran even bigger aluminiumportfolio.

What are his currentpriorities? “First I want tomaintain the momentum,” hesays. “Both companies wereoperating well before the mergerand it’s vital we don’t lose thatforward impetus. My secondpriority is to bring about a rapidand successful integration of thetwo companies so that wemaximize the value createdfrom the merger, both throughshort term synergies and longerterm strategic advantage.”

Evans speaks optimisticallyabout the future of thealuminium industry, pointing tothe steady year on year increasein the metal’s usage around theworld. As with so many otherprimary commodities, Chinahas played a key role in thealuminium demand surge, goingfrom about five per cent inglobal consumption andproduction 11 years ago to morethan 30 per cent today.

Bright though Rio TintoAlcan’s future may be, one ofthe serious constraints Evansand his senior management team are having to grapple with is theshortage of qualified technical people, a skills shortage whichtoday plagues the entire minerals sector. However, bringing thetwo companies together has meant there are some manpoweroverlaps, and this in turn will allow engineers and other technicalexperts to be freed up and redeployed into areas where the skillsshortage is particularly acute.

Additionally, the enlarged company should prove even moreattractive as an employer. “Talented, qualified people will naturallywant to join, and stay with, the industry leader,” Evans argues. “Weare the world’s leading bauxite and aluminium producer and weare on track to be number one in alumina as well. We have the bestpipeline of new projects coming through.”

It is a potent combination of assets and one that Dick Evans andhis colleagues in Rio Tinto Alcan are determined to exploit.

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


Meet the skipper

13

. . . bothcompanieswere operatingwell before the merger andit’s vital wedon’t lose that forwardimpetus.

Left and below, aluminium rolling mill, Ravenswood,

West Virginia, US.


Chris Morrisseyfocuses on bauxite,the ore from whichaluminium isderived.

DOWNTO EARTH


A detailed world atlas will show youseveral places called Alum, after a groupof minerals from which Humphry Davyreasoned (in 1808) that the metal weknow as aluminium must exist. But it hasto be very detailed indeed to show thelittle town of Bauxite in Arkansas, US(pop. 432), named after a material that isthe only important ore of that metal andforms major deposits right around theworld. Another town named after it isBoksitogorsk in western Russia, situatedabout 200 miles east of St Petersburg andjust below latitude 60N. The location issurprising, as bauxite results from anintense form of tropical weathering andmost known deposits lie much closer tothe equator.

It is because the Russian deposits areso extraordinarily old – about 350 millionyears, compared with less than 100million for most bauxite deposits – thatthey are so far north. When they formed,western Russia lay within 25 degrees ofthe contemporary equator. Presumably ithad a tropical climate marked byalternating dry and wet seasons –conditions that promote chemicalweathering. Over much of theintervening time, however, the continentof Africa has been shunting northwards,pushing ancestral Europe, including whatis now western Russia, ahead of it.

Alumina rich Bauxite actually gets its name from adelightful and gastronomically notedvillage in southern France, Les Baux-de-Provence, where alumina rich red clays(see panel, right) were discovered in 1822– three years before aluminium itself wasfirst isolated in the laboratory.

Early production of bauxite wasentirely for non metallurgical uses, whichtoday account for only about five per centof total usage. The French discovery wasfollowed by others in a number of othercountries in a broadly definedMediterranean bauxite province thatcontinues to make a small contribution toworld mine production (roughly threemillion tonnes out of a total approaching140 million).

Six countries, with Australia way out

in front, supply about 90 per cent of thatlast figure. Next in importance areGuinea, Brazil and Jamaica; then, wheremetallurgical material and marketeconomies are concerned, India andVenezuela. China surpasses the last twoin tonnage terms, but its output has ahigh proportion of non metallurgicalmaterial. In several cases the nationaloutput comes almost entirely from justone or two giant, district-sized deposits.

Giant deposits have taken millions ofyears to reach their present size andcomposition. The processes involved areslow, so such deposits tend to be found inparts of the tropics where nothing hashappened to reverse their effects ordestroy their products. So calledPrecambrian Shield areas, which form thestable nuclei of most continents, areclearly favourable when they lie at lowlatitudes. On the other hand, basalt isclearly favourable as a parent rock, andthat is not a sign of geological stability.

The huge Weipa deposit on Cape YorkPeninsular in remote northernQueensland provides an example of scale.The laterite spread it relates to, clearlyvisible in satellite photographs, extendsover at least 80,000sq.km. Within that,the main bauxite resources, those ofactual or probable economic value, makeup an irregular area amounting to some5,000sq.km. The bauxite averages about3m thick, reaching up to 10m in someplaces. At the end of 2007 there were 1.2billion tonnes of reserves and 2.2 billiontonnes of resources with an annualproduction capacity of 18.2 milliontonnes of bauxite.

Dwarfing the nation’s entire bauxitestock as it was known at the time, it wasthe Weipa discovery in 1955 that started


Down to earth

15

In our hands: Rio Tinto Alcan’s business is

grounded in the giant Weipa bauxite resource

in northern Queensland.

What’s in a name?

Alumina is the simple oxide of aluminium,expressed by the chemical formula Al2O3.Conventionally the aluminium content of rocks andminerals is given in terms of alumina, implying thatthe metal accounts for just under 53 per cent ofthe stated content.

A synthetic oxide with the same name andformula is used as a feedstock in aluminiumsmelting by the Hall-Héroult process. It is normallyyellowish white and sandy or floury in texture. Ithas a wide range of other uses, for instance inabrasives, ceramics and refractories, as a filler andcatalyst, and in glass making and water treatment.

Rather confusingly, the plural word “aluminas”is sometimes used as a collective term for naturalaluminium oxides, which include corundum and itsgem forms ruby and sapphire. And to add to thecomplications, aluminium becomes aluminum inthe US.


Australia’s climb to dominance of worldbauxite production. It happened, saidpioneer geologist Haddon King, with“minimal” recourse to geologicalreasoning. “Sudden” is another word heused about it.

It was a search for oil that first tookHarry Evans to the Weipa area. When hemade a second trip later in the same yearto follow up sightings of bauxite it onlytook him a few days to examine 84km ofcoastline from a perilously small boat,recognize a major bauxite resource andget a measure of its size. At least 250million tons was his estimate in a reportto Consolidated Zinc CEO “Maurie”Mawby. “I think we may have to knock anought off that figure,” was Maurie’sinitial reaction.

Eye in the skyThe days when an enormous bauxitedeposit could be found by eyeballing aremote area from a small boat are

probably past. Nowadays exploration ismore likely to start in the office, byexamining old reports, data and maps.Travel around the field area may be byhelicopter, which can also be used formaking closer range observations of anarea’s landform and vegetation asindicators of the presence of laterites. Inforested regions with a network ofnavigable waterways it may be largely byboat, with some possibility of spottingbauxite in the riverbank.

In any case, bauxite explorationusually involves a great deal of legwork,to cover the ground adequately and takeenough samples. Pitting is oftennecessary, or shallow drilling, to reach thebauxite through overlying materials.However typical it looks in colour andtexture, its potential as a source ofaluminium or for some non metallurgicaluse can only be guessed at until keyaspects of its mineralogy and chemistryhave been determined in a specially

equipped laboratory. Crude measures of abauxite’s quality are its content ofalumina and reactive silica, and theidentity of the main ore mineral(s).Together, they are a pointer to its likelyyield of alumina using the Bayer causticleach process.

Mineralogy matters from early onbecause diaspore does not respond to theBayer process without pre heating, andwith boehmite the process has to be run ata higher temperature than with gibbsite(see panel, facing page). Impurity levelsmatter also, to the extent that they affectthe efficiency of the Bayer process and itsunit cost in terms of such key variables asenergy and caustic soda consumption.Process efficiency and cost set the intrinsicvalue of bauxite, though many other thingshave to be factored in before decidingwhether or not it is worth mining.

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

Down to earth


16

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.


Bauxite - the material

You could say that in bauxite Nature makes a meal of its own leftovers. AsHaddon King put it in “The Rocks Speak”, the ore minerals in bauxite are not somuch concentrated by addition as left behind when almost everything else issubtracted. The result is an alumina rich residue that may be any colour fromwhite through shades of yellow and red to deep brown, and any texture fromearthy and clayey to compact and bouldery.

It is related to the much more common tropical weathering product calledlaterite, which has many of the same constituents but a higher proportion ofiron. A variety called aluminium laterite bridges the compositional gapbetween the two but generally falls short of making ore.

Bauxite deposits may be pockety, blanket like, or interlayered with solidrock. The bauxite may have formed where it is or been moved there by somecombination of water and gravity. Its parent could have been almost any rockor earlier weathering product that contained aluminium, including fairly purelimestone. Limestone derived deposits, best developed in Jamaica, tend to bepockety. More important are laterite related deposits, which can spreadcontinuously over thousands of square kilometres.

Fossil bauxites may be sandwiched between solid rocks and are sometimesworked underground, but most economic deposits lie under nothing butlaterite, soil and vegetation and can be worked in open pits.

The ore minerals are hydrated oxides of aluminium – two called diasporeand boehmite (or böhmite) with an alumina content of 85 per cent, and a thirdcalled gibbsite with 65 per cent alumina. They form at the expense ofaluminous precursor minerals such as feldspars and clay minerals, usually asmicroscopic grains and coatings. The coatings give small (say 0.5-1cmdiameter) spherical concretions called pisoliths, and even smaller ones calledooliths.

Other typical constituents are iron oxides and hydroxides, kaolinite, quartzand small amounts of titanium and zirconium minerals. They have nocommercial value in themselves, though several of them have a definitebearing on how the bauxite is used and how it responds to processing.

There have been attempts at co-producing bauxite and the high gradekaolin that sometimes lies above or below it. In some regions there are cleargeological links between bauxite and gold. Systematic assaying of bauxiteexploration drill cores helped to delineate the Boddington laterite hosted goldorebody in Western Australia.


Julian Cribb reportson how theformation of RioTinto Alcan hasunited two topmetallurgical R&Dteams in a world-wide drive to make aluminiumthe twenty firstcentury’s greenestmetal.

The latest Audi, Jaguar and ChevroletCorvette supercars and the giant Airbus380 rely on aluminium for theiroutstanding performances, fuel efficiencyand low greenhouse emissions,highlighting it as the structural metal ofthe future.

In the first decade of the twenty firstcentury, the aluminium production processis being reinvented within Rio Tinto Alcan,the world’s largest producer since themerger of Rio Tinto with Alcan in late2007. Plans are far advanced to slashgreenhouse gas emissions, cut energy pertonne of metal and shrink ecologicalfootprints – while maintaining fierce pricecompetitiveness against rising metalsgiants such as China and Russia.

Once worth more than its weight in puregold, aluminium was chosen in 1855 tocreate a royal dinner service for NapoleonIII because of its very rarity. Today, thanksto Messrs Hall and Héroult, who in 1886simultaneously invented an electrolyticprocess for extracting the metal from itsoxides, it is the world’s most popular nonferrous metal, with production now in therealm of 40 million tonnes a year – over atenth of which is produced by Rio TintoAlcan.

Global state of the art aluminiumproduction is due to start shortly in theSaguenay region of Quebec, Canada, whereconstruction is under way on a pilot plantproducing 60,000 tonnes of metal a year.This plant will pioneer Rio Tinto Alcan’s

much anticipated AP 50 aluminiumextraction technology, designed to send asizzling 500,000 amperes through the meltin the name of more metal at benchmarkspecific energy consumption. The fact thatthe energy source will be green hydro-electric power with zero carbon emissionsgives the plant an even more futuristic feel.

Breakthrough technologies“The pressures from climate change areomnipresent,” says Don Macmillan, vicepresident, Technology and OperationalExcellence for Rio Tinto Alcan PrimaryMetal, in his soft Scots burr. “We’ve beenfacing up to them for some years and havealready had notable successes, such as allbut eliminating fluorocarbon emissions.There are a number of breakthroughtechnologies, which we’ve been quietlyworking on, that will be channelled intothe AP 50 platform.

“In smelting,” he declares, “the bigchallenge is to pump as much current asyou can through the melt while reducingunit energy consumption as much aspossible.” AP 50 is designed to do just that,increasing current intensity to the highestlevel ever achieved in the industry – withspectacular scope for productivity gain, asmaller footprint, reduced capital andlabour costs and a cleaner, greener, moreprice competitive product.

AP 50 is the progeny of a dynasty ofleading edge technologies developed by RioTinto Alcan and its forebears such as Alcan,


18

REACHFOR THE SKY


Pechiney and Alusuisse. Evolved over threedecades through the AP 18 and AP 30systems – today deemed the “goldstandard” in aluminium productionefficiency and employed or emulated inplants around the world – AP 50 willoutshine previous performances, with ananticipated output of around four tonnes ofmetal a day per cell, an advance over thestill widely used AP 18.

For the same number of pots, an AP 50potline will produce 67 per cent moremetal than a 300kA potline and 40 per cent more than a 360kA potline. Themedium-to-longer-term goal is to cutoverall energy use per unit of aluminiumproduced by up to about a fifth, with anultimate target of 11kWh per kilo of metal.These concepts will be developed andproved at Rio Tinto Alcan’s facility at St-Jean-de-Maurienne, France, and willundergo further development and “roadtesting” in Quebec.

What goes on inside an AP 50aluminium production cell is akin to theprocesses at the heart of a star – and thephysics no less complex and elegant. Aswirling maelstrom of heat, electricalcurrents, molten elements and immenselypowerful magnetic forces must bemodelled, dissected and fine tuned usingthe latest computational techniques tooptimize the process of producing moremetal for less energy.

“The finessing of that process lies invery careful pot and electrical network

design,” Macmillan says. “An awful lot ofenergy goes in, and only about half of itproduces metal. The rest generates heat. Soa major challenge is to get the thermalbalance right. This involves a lot of finiteelement analysis and numericalmodelling.”

The second major challenge is to controlwhat goes on inside the cell with fingertipprecision – the plane of the anode, the gapbetween the electrodes, the flow ofalumina into the cell. Here Rio Tinto Alcanhas notched up one of its stellar advancesin the “greening” of aluminium,overcoming the so called “anode effect” inwhich voltage surges cause the release ofhighly greenhouse-genic perfluorocarbon(pfc) gases, an environmental challengethat has bedevilled the world aluminiumindustry for decades. The group’s ALPSYSpot control system is poised to banish it forgood, Macmillan says, besides boostingoverall current efficiency.

There remains, however, one soaringscientific peak which Rio Tinto Alcan’sresearchers are determined to scale:eliminating greenhouse gas emissions fromsmelting overall. Currently, withhydropower, the main emissions arise fromthe burning of the carbon anodes whichsupply power to the melt – about a tonneand a half of CO2 for each tonne ofaluminium produced.

Where fossil fuels are used to generatethe energy for aluminium production, 91per cent of the total greenhouse emissionsare typically in the smelting process, threeper cent in mining the bauxite and six percent in refining the alumina. Thishighlights the importance of tackling theemissions from power generation incountries where hydroelectricity and other“clean” energy options are not available.

Clean coalAs a business that produces more than halfof its own energy, Rio Tinto Alcan findsitself in a leading position to hasten theintroduction of new “clean coal”generation technologies such as integratedgasification combined cycle (IGCC) andcarbon capture and storage (CCS), andmuch effort is now going into this.Between 1990 and 2005, Rio Tinto Alcanmanaged to drop its total GHG emissionintensity by 25 per cent, with a further tenper cent targeted by 2010. The long termdream is to zero the greenhousecontribution of aluminium smeltingaltogether.

Such vaulting ambition is of centralimportance in today’s climate sensitivemarket. The average car’s aluminiumcontent has jumped from 240lbs to 357lbsin the quest for fuel efficiency. Peak oil andthe higher fuel costs it ushers in will onlyaccelerate that trend, and while resins,

plastics and titanium compete at themargins, the car of the future is likely to besubstantially built from aluminium. If thealuminium can come without greenhousepenalty, it will be doubly attractive tomotorist and manufacturer alike.

“The Holy Grail for aluminiumproduction is greater energy conservationand lower environmental impact at lowestfull economic cost,” Don Macmillan states.And, like knights of old, he keeps the Grailclearly in view, knowing the formula ofcompetitive price plus green status will besovereign in fending off the challenge fromrising metals powers such as those of Chinaand Russia.

Rio Tinto Alcan’s present technologicalascendancy is an amalgam of the wisdomfrom several “tribes” of researchers, each inits unique way at the cutting edge of itsfield – Alcan, Pechiney, Alusuisse, Comalcoand Rio Tinto being the main contributors.Today these once competing teams havebeen forged into one of the world’s mostpotent and forward looking metallurgicalresearch enterprises – a global organizationof some 500 staff who together representthe undisputed industry leaders inaluminium smelting technology, declaresDon Macmillan, “We are all dedicated tomaking aluminium the world’s green metalof choice,” he says.

Rio Tinto Alcan Applied EngineeringCentres cover the full chain from exploringfor high yield bauxite deposits to thedevelopment of superior packaging forgourmet foods or medical devices, novelaerospace alloys, electrical cables that don’tcatch fire, flat TV screens and clean watersolutions for developing countries. Theirstrength lies in the ability to networkleading minds in real time into virtualresearch teams which span the globe andcan crash tackle even the biggestchallenges. Their spear point is the proof ofconcept facility at St-Jean-de-Maurienne,where the best ideas become reality.

The philosophy that impels all this isarticulated by Jacynthe Côté, president andCEO of Rio Tinto Alcan Primary Metal, whosays: “Today’s globalized world is a worldconfronted with environmental and socialchallenges, but we are convinced that there is an increasingly close relationshipbetween the protection of the environ-ment, socio-economic progress andcompetitive advantage.

“Definitions of sustainability aboundbut the common denominator among all ofthem is that sustainability is about makingdecisions and taking actions to createeconomic, environmental and socialconditions that generate the most value foreveryone, today and for generations tocome,” she adds.

The same drive for sustainability andcost efficiency permeates the upstream


Reach for the sky

19

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.


tasks of mining bauxite and refiningalumina, where the aim is to position RioTinto Alcan in the first quartile of theindustry cost curve.

The Bayer process for extractingalumina from bauxite – which fatheredmodern hydrometallurgy – has mainly seenincremental change since its discovery in1887, says Vincent Christ, Rio Tinto Alcan’sgeneral manager of Technology. In view ofthe fact that energy accounts for a quarterof today’s production costs, the goal is astep change in energy efficiency alongwith enhanced recovery of the caustic sodaused in the process.

Rio Tinto Alcan is in the pilot plant stageof improving solid liquid separation. Thisgenerates gains in washing efficiency andresults in both better soda recovery and athicker bauxite residue stream, which iseasier to neutralize. At the same time majorimprovements are being made to liquoryield and productivity, leading to lowerenergy demand.

ExpansionOther measures taken by Rio Tinto Alcanto improve the efficiency of aluminaproduction include using a pre-assembledmodule strategy for its huge aluminaexpansion project at its Gove site inAustralia. The strategy entailed majorequipment components being fabricatedand fitted offsite and shipped to Goveready for installation, which not onlyheightens cost savings and constructionefficiency but is also a solution perfectlytailored to remote resource developmentprojects.

This strategy formed part of a plan toalmost double Gove’s production capacityfrom two to 3.8 million tonnes a year in2009.

At the same time, says Vincent Christ,plans are on the drawing board for a novel,more compact style of alumina refinery –

one that is lower in capital, energy andlabour costs and has a smallerenvironmental footprint. This has becomefeasible thanks to the world’s soaringappetite for light metal which is creatingthe opportunity for Rio Tinto Alcan to builda new aluminium smelter at least everythree years. “To feed these smelters weneed to build a new alumina refinery atleast every five or six years, and this givesus the opportunity to rework the design,”he says.

The other big environmental questionhanging over the global alumina industry iswhat to do with the 50 million tonnes ofbauxite residue it produces each year as aby product of extraction – one of theworld’s larger residue managementchallenges. On average, a tonne of aluminagenerates 0.6 to 0.9 tonnes of bauxiteresidue. An innovative approach tomanaging this challenge has beendeveloped at Rio Tinto Alcan’s laboratory atGardanne, France, where residue is filtered,dewatered and transformed into acommercially viable product known asBauxaline®, suitable for use as a groundcover layer to seal, protect and rehabilitatewaste landfill, or as a fill and foundationmaterial in civil engineering projects suchas road embankments.

In bauxite mining the main challengesare to increase the efficiency of the miningand blending operations, says OscarGroeneveld, former CEO of Rio TintoAluminium and now strategic adviser to RioTinto’s CEO, Tom Albanese. This is essentialfor driving down energy consumption andgreenhouse emissions in the miningprocess and accelerating the restoration ofthe landscape to native forest.

He explains: “Most bauxite mines willcontinue to be open cut because mostorebodies are close to the surface and thetonnages of material involved are so vast,but we now have decades of experience in

restoring the site to a condition very closeto its original state.”

This involves careful handling of thetopsoil so as not to lose precious fertility,insightful management of site conditions,hydrology and soil biology and replantingwith the keystone native species that willregenerate the ecosystem. Such knowledge,pioneered by bauxite miners, may have apowerful role to play in the future byhelping to restore the world’s tropicalforests from the clearing of recent decades

RestorationReducing the footprint of such largeoperations as bauxite mining, whichcover thousands of hectares, ischallenging, but can be achieved byensuring that restoration follows themining as closely as possible.

“The main areas for cost efficiencies inbauxite production lie in minesite design –disposition of hubs and spokes thatminimize materials haulage and handling,strategic use of rail and, where appropriate,automation for safety and operationalefficiency,” says Groeneveld. “In addition tothis, an organization must address theshortage of skilled labour in remotelocations. All this combined will contributetowards lower overall greenhouseemissions from the aluminium sector.“We’ve seen smelting emissions comedown significantly due to vastly improvedprocess control – similar opportunities andchallenges apply to bauxite mining andrefining. There are also prospects forimproving the dissolution andcrystallization processes at lowertemperatures that could lead to bigsavings.”

The Grail here, in Groeneveld’s view, is amethod that immobilizes reactive silicapresent in bauxite and prevents it fromlocking up precious soda, which wouldreduce the waste associated with one of theindustry’s biggest inputs.

Like Vincent Christ, Groeneveld seesbauxite residue to be a major challenge forthe industry. In populated regions it may beturned into bricks and tiles, used to buildroads or to line irrigation channels. Andthere is some evidence it can be used toamend agricultural soils which havebecome too acidic or are contaminated byheavy metals; but, for now, it remains aconundrum.

Julian Cribb is adjunct professor of sciencecommunication at the University ofTechnology, Sydney, and was previously scienceeditor of “The Australian”.


20

Two members of the ALPSYS team, Benoît

Sulmont and Stephane Prodent, working on

the project.


Stepping back tolook across theyears is Mike Reilly,reflecting on over a century of Alcan history.

Alcan’s proud history stretches back to1902, when it was created as a northernarm of the predecessor of the US based

Alcoa. Canadian operations expandedon the back of enormous

hydroelectric potential across thelower eastern edge of theCanadian Shield, home to aspidery network of snow andrain fed rivers in Quebecprovince.

Power generation andsmelting operations camerolling in to what had beensmall sleepy towns on the edgeof miles of wilderness andbarren ground. The dam and

generator construction activities,close to where many rivers pour

into the St Lawrence with itsdeepwater 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 SaguenayRailway, the firm took control of a vitaltransport link between port and plant notfar from Quebec, downriver from itsMontreal headquarters. In the 1920s,plants to produce wire and cable, cookingutensils and other end products wereestablished in Toronto and Quebeclocations in parallel with the growingalumina production facilities.

Demands for infrastructure wherenone existed brought the company intohousing. Thus, in the same decade, thecity of Arvida (now part of Ville deSaguenay) was established near the powerand alumina production facilities on theSaguenay River, to become over the nextdecades a principal location of severalproduction facilities and power houses,including the largest in the world at thetime on Isle-Maligne.

Model cityThe name Arvida came from the first twoletters of the three names of ArthurVining Davis, president of the parentcompany Alcoa. It was a model city,designed to accommodate up to 40,000people, anticipating everything theywould need from schools to churches.Davis went on to be one of the bestknown names in America, promotingaluminium use and fighting USgovernmental controls even as he wonplaudits from the same government forhis work with aluminum during the waryears.

Meanwhile, capitalizing on itsprofitability and business prowess,Alcoa’s Canadian subsidiary, theNorthern Aluminum Company, eitherbought into or created a wide range of


21

BIRD’SEYE VIEW

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.


aluminum companies across northernEurope, beginning early in 1909 with theestablishment of a UK subsidiary,Northern Aluminium Company, later tobecome part of British Alcan Aluminium.

Moving quickly in the first decades ofthe twentieth century, the company’sfootprint extended into France, Norway,Denmark, Germany and Italy. Other nonAmerican operations were added in 1928when Alcoa decided to divest into a singlevehicle most of its primary overseasbusinesses. By then, Alcan was so largethat its home country, Canada, could onlyabsorb 15 per cent of its productionoutput. Globalization, while not acommon term at the time, was whatAlcan was all about.

During the 1930s, Alcan was a fullblown world aluminium provider with itshand in everything from pit to (frying)pan. To deal with its now sprawlingbusiness the company embarked on aprogramme of shaping and trimmingaround the world. Various elements weresold, reduced or closed down. But even asconsolidation was the general watchword,Asia came into sharper focus. Thecompany established businesses in Japan,India, and finally Australia, where itfounded the Australian Aluminium

Company in 1939 with two otherpartners. Already buying its bauxite fromAustralia as well as other offshoresources, direct participation in theindustry locally was long overdue.

Critical contributionsThe demands of World War II amplifiedaluminium use, especially as air powerrose to prominence well beyond anyprevious conflicts. The breadth and depthof aircraft use, and losses, pushed outputto levels no one could have imagined. Amajor factor in aeronautical developmentin Canada and the UK in the early years,Alcan’s contributions to the industry alsowere critical when the US joined the wareffort later on.

During the period Alcan pushedforward with its already plannedexpansion of installed smelter capacity atCanadian facilities, crossing the 500,000tonne mark in 1943. That may seem lessthan impressive by today’s standards, butmore than half a century ago the numberwas eye popping and, as in the rest of theindustrialized West, the escalating wareffort brought even more remarkablecapability. By March of 1944 the companyhit a wartime peak at all Quebec smeltersof 1,400 tonnes per day.

The war by no means impaired thegrowth of Alcan on a global scale: it mayeven have helped. South America wasparticularly important. Rolling capacitywas built in Mexico, bauxite was thetarget in Jamaica and Alcan set upAlumínio do Brasil SA in the continent’ssouthern cone.

Across the Pacific there was moreexpansion with the beginning of rollingand smelting operations in Granville,Australia and, to the north, start up of anew smelter in Alupuram in Kerala state,India.

There were six iterations of thecompany name through its history beforethe merger with Rio Tinto, but it was notuntil the end of World War II that thename Alcan actually appeared, registeredin 1945 as a trade name when the finalconnections with Alcoa were declaredsevered after a protracted legal battle(during which, among other things, Alcoaargued that no one else should use theword “aluminium” in business). It took acouple more decades to give the Alcanname to the full enterprise – thecorporate name changed fromAluminium Limited to Alcan AluminiumLimited in 1966.

The postwar years were a blur of


22

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.


additions and modifications to Alcan’sglobal presence. There were expandingpower projects, new bauxite operationsand dozens of new refining plants anddownstream businesses created orbought, either in part or in full, between1950 and the late 1990s. In addition toother locales, the company’s presenceappeared in Colombia, Venezuela,Uruguay and Argentina in parallel withlarge expansions in Brazil.

AcquisitionsJumping finally into the US market in1960, Alcan teamed with three partnersto create a big new rolling mill inOswego, New York. More than a dozenacquisitions and expansions followed –many, like Oswego on the shores of LakeOntario, along the newly opened StLawrence Seaway which at completionran to well over 2,000 miles long.

In Asia and Oceania, China, Malaysia,Indonesia and New Zealand were newnames in Alcan’s geographical roster andexpansion moved dramatically inAustralia and India with rolling mills,extrusion plants and aluminium smeltersbuilding capacity.

While much of the concentration wason rolling mill operations, the postwar

expansion brought the company intonearly all types of processing andproducts ranged from wire and cable tofoils, powder and paste, among manyothers.

It was time to take a breath andconsolidate.

Once more, trimming and shaping wasapplied to the business. Divestment andrestructuring are recorded as the mainactions in the company archives, but asbefore, new opportunities were not longto be ignored.

The outstanding growth in the earlypart of the twentieth centurynotwithstanding, the 1990s soon becamean era of even larger growth. Amongother things, Alcan became the mainsupplier of aluminium to General Motors,the world’s largest auto producer. Itsaerospace business, based on thecompany’s vital role in wartimeproduction, moved to new levels as theindustry grew. By 2006 for instance, theengineered products group at Alcan wasthe number one aerospace supplier ofvalue added sheet, plate and extrudedaluminium products in Europe. In overallsize, the decade’s expansion was thegreatest ever for the company,culminating with the acquisition of

Alusuisse and the laying of groundworkfor the acquisition of the French groupPechiney.

The three way combination did not goas smoothly as first envisioned in the late1990s. The European Union stepped inwith concerns over competition, andrather than comply with some of itsdemands, Pechiney withdrew from themerger. However, within a few years,Alcan formulated an approach toPechiney that was to be successful andthe formal acquisition was completed inDecember 2003. A year later the companyspun out much of its rolled product into anew company, Novelis. This left Alcanwith operations firmly focused upstream;more than half its assets were in bauxite,alumina and primary metals.

Now at a size just about even with itsfounding former owner Alcoa, Alcannonetheless found itself a target of anunsolicited offer from Alcoa. This move,early in 2007, was soon countered by RioTinto’s bid. Alcoa backed away and therest, as they say, is history. Rio TintoAlcan was born.

Mike Reilly is a former Reuters correspondentand executive who writes on business,technology and travel from Long Island, NY.


23

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.


22862_Cover Supplement 22/2/08 14:18 Page 6

It was more than five years ago that themanagement of Richards Bay Minerals(RBM) first sat down to begin a trans-formation of their company. In areformed South Africa, with new legis-lation and a focus on the empowermentof those who had suffered underapartheid, RBM’s team set out to planhow the company should meet these newconditions.

Tackling issues of great depth andsubtlety, they have considered how bestto adapt to new laws, how RBM can workas a force for empowerment in thecountry, and how to achieve these goalswhilst maintaining RBM’s excellenteconomic and commercial record. As aleading global producer of titanium slag,pig iron, rutile and zircon, RBM is asignificant asset in Rio Tinto’s portfolio(owned 50:50 with BHP Billiton).

Now, the five years of planning arecoming to fruition. In June the companywill submit a conversion application to

the South African government, outlininga plan for the sale of a 26 per cent stakein the company, in addition to furtherproposals concerned with socialdevelopment, employment equity, andlocal beneficiation.

Following South Africa’s first demo-cratic elections, in 1994, the governmentpassed a range of legislation aimed atredressing the historic imbalancebetween a largely white owned economyand those peoples who were disadvan-taged under apartheid. A number of farreaching laws have come into effect,covering such areas as skills development,economic ownership, and demographicrepresentation within the workforce.

In 2002, the government passed theMinerals and Petroleum ResourcesDevelopment Act (MPRDA), givingownership of all mineral rights to thestate. The MRPDA gave rise to the MiningCharter – a comprehensive roadmap forbroad based economic empowerment

Rio Tinto Review

13

Ownership. Mining companies arerequired to sell a voting share of their

operations to corporate entities that are ownedor controlled by Historically DisadvantagedSouth Africans (HDSAs).

Preferential procurement. Wherepossible, operations are required to give

preferred supplier status to black ownedcompanies.

Human resource development deals withrequirements for mining companies to

formulate skills development strategies,provide scholarships to promote mining relatededucation, and train existing employees.

The employment equity pillar establishestargets for the equitable representation

of HDSAs at management level. Operations arerequired to have a black managementparticipation of 40 per cent by 2009. This pillar

also requires that companies increase theiremployment of women, aspiring to a workforcecomprising ten per cent women by 2009.

Housing and living conditions. Miningoperations must work to improve the

standard of employee housing, by upgradingexisting accommodation and by promoting homeownership options.

Beneficiation. In partnership with thegovernment, mining companies are

expected to identify opportunities to increasethe local beneficiation of their products: fromsecondary refinement to the production of finalconsumer products.

Community and rural development.

Mining stakeholders are required to formulatedevelopment plans for those communitiesaffected by mining, and to ensure there is nodiscrimination against foreign migrant labour.

1

3

4 7

6

52

David Bannisterlooks at howRichards BayMinerals isresponding asthe winds ofchange re-shapeSouth Africa’sindustry.

Seven pillars of transformation

22862_p13-15 22/2/08 14:06 Page 1

within the mining industry. The Mining Charter presents “a shared

vision of a globally competitive miningindustry that draws on the human andfinancial resources of all South Africa’speople, and offers benefits to all SouthAfricans”. The charter recognizes thatwomen and black people (the term hereincludes white women, Indian andcoloured peoples) were largely excludedfrom participation in the mainstreammining economy, and seeks to redress thisthrough a number of mandatoryrequirements, to which all miningoperations must adhere.

The Mining Charter is based on a set ofseven “pillars” for transformation, eachdealing with a distinct facet of the process(see previous page), requiring a scoredadjustment from all mining companies.

All mining companies in South Africahave been given a deadline of April 2009for the submission of applications forconversion. Each application will bescored according to how well itstransformation plan adheres to theMining Charter’s criteria, and a companywill only be considered to hold “NewOrder Mineral Rights” once thegovernment’s Department of Mineralsand Energy (DME) has accepted itsapplication.

In fact, RBM has long been a nationalleader in terms of corporate socialresponsibility and Black EconomicEmpowerment (BEE). Over 2005-2006,RBM spent over one billion rand(US$146m) in procuring goods andservices from BEE companies. It has alsohelped the establishment of a number ofBEE startups.

They include Ascent Mining Services,which has a dry mining contract at RBM’sponds worth millions of rand per year;Isolezwe Security, which performs


Rio Tinto Review

14

security duties at RBM’s mine sites; andNorth Safety Products, which has a 50 percent BEE ownership comprised entirely ofrural women. These and other initiativesby RBM have worked to create over 1,800jobs in the poorer communities whichsurround the mine. In 2006 the companyreceived the Corporate EnterpriseDevelopment Award at the respected“Investing in the Future” ceremony, runby the Mail & Guardian newspaper.

It is with the benefit of theseachievements that RBM moves towards

22862_p13-15 22/2/08 14:07 Page 2

Rio Tinto Review


15

the submission of its conversionapplication. In some areas the company isalready in compliance with, andexceeding, the requirements of theMining Charter. It already provides itsemployees with a housing and mealsubsidy, and has never accommodatedstaff in the single sex hostels whichdominate some other operations. It isalready focused on the development ofskills for its employees and the localcommunity, and is presently investigatingthe possibility of establishing a Faculty ofEngineering and Technology at theUniversity of KwaZulu Natal, to addresscritical skills shortages.

The most significant changes at RBMwill come through the sale of anownership stake in the company. Thecharter requires that a minimum share of26 per cent be sold at fair market value toHistorically Disadvantaged SouthAfricans; this gives an exercisable vote inthe company. In some other BEEconversions this requirement has resultedin a large share of a company being soldinto the hands of a single individual orcorporate entity, creating an elite class ofthe super wealthy, without bringing manybroader benefits.

General manager for Strategic AffairsThabi Shange, who is overseeing theconversion plans, spoke about the stepsRBM has taken to ensure a broad

distribution of the 26 per cent stake. “Wedon’t want to take the old route, helpingonly the select few,” says Shange. “Withthis in mind we’ve brought together aconsortium of interests, including blackowned business, women’s groups, and thelocal communities, all of whom stand tobenefit. We’ve also included ouremployees through an Employee ShareOwnership Plan.”

Selection processA broad based consortium has beenassembled to buy the 26 per cent stake in RBM. After a selection process which started with 149 candidate BEEcompanies, six were selected to part-icipate in the ownership of equity. Thesesix companies will join the South AfricanWomen’s Association, and four localcommunities, in buying a 24 per centstake in RBM. The remaining two percent will be made up of an EmployeeShare Ownership Plan, paying dividendsto RBM employees.

The four communities involved arethose located close to the mine – Dube,Mkhwanazi, Sokhulu, and Mbonambi.Their populations range from 25,000 to60,000 people, and they will each buy a2.5 per cent share of RBM, equivalent toten per cent of the consortium’s overallstake. Each community will be repre-sented by a trust, receiving dividends fromthe consortium which can then be usedfor community development projects,microfinance, and other initiatives.

In addition to the carefully selectedBEE companies, and the communitytrusts, a further two per cent of the stakewill be purchased to found the EmployeeShare Ownership Plan (ESOP). Eachemployee who serves at RBM will receivea share of the dividends which the ESOPreceives, representing a considerableamount for each of the mine’s 1,750employees.

The financial dimensions of thetransaction are complex, and much carehas been taken to create the bestarrangements for both the newconsortium and the existingshareholders. RBM and its shareholdersare in the process of drafting optimalvoting agreements, defining when thenew consortium is able to exercise itspower of veto, and finessing certainfinancial aspects of the transaction.

“There are few BEE transactions whichoffer such a win win opportunity,” saysBruce Beath, general manager for Financeat RBM. “We are able to arrange financingfor the consortium by using RBM’sbalance sheet as surety, meaning thatlocal banks are comfortable with fundingthe transaction. We are also able torestructure certain aspects of the

company to facilitate this funding.”The empowerment of RBM’s two

subsidiary companies (Tisand andRichards Bay Iron & Titanium), also allowsfor the optimization of existing projects,ensuring that they are brought online atthe right stage. Bruce emphasizes thatRBM is not giving away the 26 per centshare, contrary to some perceptions ofBEE deals – the stake will be bought forfair market value.

“RBM already exceeds the require-ments of legislation governing the miningindustry,” says George Deyzel, RBM’soutgoing managing director. “Our focus isto ensure that the transaction is as broadbased as possible, to benefit people atgrassroots level. This new partnershipreflects our commitment to trans-formation and sustainable developmentin South Africa.”

In the face of inevitable and necessarychanges in South Africa, RBM’s proposedconversion presents an approach whichoffers all round gains. The existingshareholders will benefit from theconsiderable long term opportunitieswhich compliance with the MiningCharter will bring, in terms of continuedoperation and profit. The BEE consort-ium, local communities, and theemployees themselves will certainlybenefit from economic participation in ahighly successful mining enterprise.

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.

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

22862_p13-15 22/2/08 14:07 Page 3

A mountain

to climb

22862_p16-20 22/2/08 15:48 Page 2

Eric Finlayson, the 47 year old Scotwho has been in charge of Rio Tinto’sExploration group since the beginning oflast year, is nothing if not a realist. It’s aquality much needed in his job. He has amountain to climb.

“The fact is, most exploration isunsuccessful,” he admits. “A few years ago,we analysed our performance and foundthat for every 3,000 ideas which go in atone end of the pipeline, only one discoverypops out of the other end. And we’re nottalking hare brained ideas here but solid,defensible targets.”

Before calling for the instant dismissalof Finlayson and the entire 950 strongExploration team for converting a meagre0.03 per cent of prospects into a successfulcommercial outcome, we need to be awarethat this is very much the norm for the

mining industry. Indeed, as Finlaysonpoints out, a similar success rate hasemerged from studies of global researchand development across many industries.In other words, whether it’s electronics,pharmaceuticals, or mining, there seems to be some deep, underlying connection inthe process of opportunity generation.(The experts have dubbed thisphenomenon the Universal SuccessCurve.)

But this doesn’t mean Finlayson iscontent to accept the 0.03 per centindustry norm. “In the past few years we’veachieved one in 2,500 or even 2,000,” hesays, “but we’re constantly striving to dobetter still. That’s what explorationperformance improvement is all about:reducing the number of misses before youget your hit.”

IntersectionsThe Exploration group aims to bank, onaverage, one discovery a year and overtime it has managed to hit this targetfairly consistently. However, as a measureof success it is a rather crude one. A moreuseful performance yardstick is thenumber of “economic intersections” madein a given year. Finlayson explains that aneconomic intersection occurs when youdrill a hole and encounter mineralizationof such grade and width that if theorebody were to extend beyond the drillhole in any significant direction, it wouldmean the deposit was economically viable.

“Historical analysis has shown that onein ten economic intersections results in adiscovery,” he adds. “So, if we are aimingfor at least one discovery a year, we shouldexpect to be making about ten economicintersections annually. On the other hand,if you are working an exploration area thathas not turned up any economicintersections for several years, it’s time tothink again.”

Eric Finlayson grew up in a coal miningtown in central Scotland but he says it wasnot the local mining activity which madehim want to become a geologist but rathera desire to escape from an unattractiveurban environment and see the world.That desire for travel had originally beenkindled by a family holiday in Spain – stillin the 1960s an out of the ordinarydestination rather than the package tourdestination it later became – coupled witha boyhood interest in philately and theexotic places the stamps revealed.

A career in geology would, he thought,offer him a passport to see the world, and

Rio Tinto Review

17

Statistically, thetask looks trulyawesome. And,Peter Brigg discovers,Eric Finlayson’sExploration teamsneed to strike itrich to provide aflow of new projectsfor the Group.

Facing page and left: iron ore exploration in

progress high in the interior of Guinea, west

Africa. Inset, global head of Exploration Eric

Finlayson.

22862_p16-20 22/2/08 15:49 Page 3

so he took up the offer of a place at theUniversity of Strathclyde in Glasgow,where he studied for a degree in AppliedGeology.

After graduating, he worked as anexploration geologist in Ireland andTurkey, before having a short spell as ageochemist in Malawi, where he waslooking for uranium to fuel Britain’snuclear power stations.

Finlayson joined the Rio Tinto Group in1989 when he was recruited into Kenne-cott Exploration as a project geologist.Based in Sydney, he was responsible forcopper and gold exploration in thehighlands of Papua New Guinea (PNG) –an area with which he was very familiarbecause he had just spent five years there,helping conduct a national geologicalsurvey for the PNG government.

Looking back on his time in PNG, hesays it was physically the most arduous butprobably the most enjoyable work of hisentire career. “I was meeting people fromisolated communities,” he recalls. “Dogswould sometimes howl and children fleein terror at the sight of their firstEuropean.

“In 1984, I was on a two week exped-ition, cutting through the rain forest andhoping the helicopter would find meagain, when I bumped into a small group

of forest people. One of them had a bagcontaining the smoked remains of hisgrandmother. In PNG, eating deadrelatives is part of a religious process thatis believed to release the spirit of thedeceased. He kindly offered me a piece of his grandmother in exchange for someof the items I was carrying. I declined, but to this day part of me regrets passingup the opportunity, legitimately and in a culturally acceptable way, to eatsomeone!”

Fearsome fellowOn another occasion, this time searchingfor gold deposits for Kennecott, Finlaysonfound himself surrounded by several

thousand native prospectors who werevisibly disappointed and angry at theirlack of success in finding any of the goldthat was rumoured, falsely as it turnedout, to lie in the area.

“One fearsome looking fellow, who waswearing a World War II Japanese helmetand waving a bayonet under my nose, wasparticularly 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 leftme alone while it went to refuel – I jumpedaboard shaking like a leaf.”

After five years based in Sydney, duringwhich time he formally adopted Australiancitizenship, meaning he now has dualBritish/Australian nationality, Finlaysonmoved to Vancouver. Initially he wasKennecott’s regional exploration managerfor western Canada but he subsequentlytook on responsibility for the whole ofCanada.

In 2000 he transferred to Rio Tinto’sLondon as assistant to the head of theExploration group, before being postedtwo years later to Perth in Australia. Therehe spent five years running the Group’sexploration programme in Australia, Indiaand Indonesia.

Eric Finlayson likes to spend his leisuretime with his Korean partner, Kumju, and

A mountain to climb

Rio Tinto Review

18

...we’ve found four moredeposits close to theoriginal one, meaningthat instead of two billiontonnes of mineralizationwe could be looking ateight billion.

22862_p16-20 22/2/08 15:49 Page 4

their two young children, Euain, three, andEumi, two. “We take them swimming andwalking every weekend,” he says. “And Ihave a 17 year old daughter, Morgan, whois a good lacrosse player, so on SaturdaysI’m often on the touchline supporting andcheering her on.”

A keen cook, he admits to being“infuriatingly slow in the kitchen”. Heenjoys reading but regrets that work andfamily pressures mean he has less time forthat recreation than he’d like. He says hisfavourite book would be either The TinDrum by Günter Grass or the notoriouslydark American Psycho by Bret Easton Ellis.

Finlayson’s move back to London at the beginning of 2007 as head of theExploration group marked the start of anew and exciting phase of his career andhe talks with enthusiasm about the host ofpromising exploration developments nowin Rio Tinto’s portfolio, some of them closeto existing operations, others in totallynew areas.

“We’ve been mining copper at BinghamCanyon in Utah for 100 years and thoughtwe knew it like the back of our hand,” hesays. “But to our surprise, right below theopen pit, exploration geologists atKennecott Utah Copper have discovered amolybdenum-dominated orebody, about1km high and 300m wide. Or again, in the

Pilbara in Western Australia we areconstantly turning up new iron oremineralization. In the past five years theExploration group has handed over about2.2 billion tonnes of mineralization toPilbara Iron. For every two cents we spendon exploration there, we are finding onetonne of mineralization, which by anymeasure is a tremendous return oninvestment.

“At La Granja in Peru, we thought wewere evaluating a single copper depositbut in the last 12 months the explorationteam has found four more deposits close tothe original one, meaning that instead oftwo billion tonnes of mineralization wecould be looking at eight billion,” he says.“Or take aluminium. We’ve obtained somevery interesting results fromreconnaissance exploration for bauxite inBrazil and Colombia, including some fromareas where no bauxite had previouslybeen found.

“In Mozambique we’re working on acouple of heavy mineral sands prospects.Like the ilmenite deposits in Richards Bayin South Africa, they’re right beside thebeach and their chemistry is identical towhat’s going currently into our RichardsBay smelter, so it looks as if we shall have asecure future feedstock for that plant.”

Prospects Among the many other interestingprospects Finlayson and his Explorationteam have in their locker are a couple ofgood zircon finds in Australia. Zircon, a highvalue, heavy mineral used in themanufacture of ceramics and TV screens, ismuch in demand in China. Then there areseveral promising coking coal projects underway around the world – notably in southernAfrica. Meanwhile, in northern India, an

Rio Tinto Review

A mountain to climb

19

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.

22862_p16-20 22/2/08 15:49 Page 5

order of magnitude study of a diamonddiscovery should be completed later thisyear. Although not a giant project, it’snevertheless one of the top three diamonddiscoveries made anywhere in the world inthe last five years.

“There is no shortage of interestingopportunities available to us,” Finlaysonsays. “The trick is to make sure weprioritize them correctly.” So, how is thedecision made as to whether to go lookingfor, say, copper rather than iron ore, or forbauxite rather than coal?

“In a nutshell, we aim for a multicommodity portfolio that’s been built up byputting together the best opportunities wecan find,” he explains. “That may meanvery little coal exploration and a lot of

copper in one year and the reverse a coupleof years later, and so on. But it would makeno sense to spend one quarter of ourexploration budget on copper simplybecause one quarter of our net earnings inthat year happened to be coming from thatcommodity. It would mean we werespending on opportunities regardless ofhow good they were. Because the successrate is so low in exploration you can’tafford to put money into second rateopportunities. Only the best shots will do.”

Rio Tinto carries out most of itsexploration programme using in-houseresources. According to Finlayson theoutsourcing model has several drawbacks.First, there can be a lack of alignmentbetween the objectives of the majorcompany sponsor and those of the juniorcompany proxy explorer. “At Rio Tintowe’re interested in giant, world class oredeposits,” he says. “A junior companywhich stumbles across a small depositmight get sidetracked onto a project thatwas not material to us.

“Secondly, by keeping the programmeinternal we can exercise control over themanagement of important issues such asbusiness ethics, health, safety and theenvironment. As other companies havefound to their cost, underperformance by aproxy explorer on issues such as these canlead to a good deal of corporateembarrassment. So, from a governanceperspective, we think it’s better for us to bein the driving seat.”

FlexibilityBut this is not to say that Rio Tinto neveruses third party proxy explorers,recognizing that their flexibility andspecialized local knowledge cansometimes offer particular advantages.

“Rio Tinto’s decision to carry out its ownexploration programme has been vindicated

by our discovery successes,” Finlaysonargues. “Our record speaks for itself.”

Since 2002, minerals markets havestrengthened significantly and explorationinvestment by the industry has gone up inline with this. In 2002, global explorationexpenditure was in the region of US$2bn.By 2007 it had risen fivefold, to more thanUS$10bn.

Rio Tinto’s own explorationexpenditure has reflected this industrygrowth trend, though not to quite such adramatic extent. In 2007, the Group spentalmost US$200m on pure explorationcompared with US$100m back in 2002.These figures do not include the cost ofprefeasibility studies and other advancedproject work that is carried out by theproduct groups, after an explorationventure is handed over to them by theExploration group.

Finlayson is at pains to emphasize thatthere is no good linear correlation betweenspending and success. This is true ofindustry as a whole and, within it, RioTinto. “We’ve done the analysis,” he says.“It’s not a case of the more dollars youspend, the more you find. It just doesn’twork that way.”

The reason, he says, is that everyorganization has a limited capacity tospend money effectively. If you go abovethat capacity the law of diminishingreturns sets in. In other words, there is anoptimal expenditure for a givenorganization’s size. So, getting the correctbalance between organizational capabilityand budget is crucial.

The minerals exploration sector haswitnessed substantial cost inflation inrecent years, with prices rising steeply infields such as drilling services, aviationand people. He therefore sees cost controlas one of his main priorities. Another isfinding and retaining the experienced,highly skilled people who are needed totranslate his group’s ambitious explorationplans into reality and to keep ahead of that0.03 per cent Universal Success Curve.

“My group’s raison d’être is to increasethe value of the company by finding newmineral resources,” Eric Finlayson says.“That task is a lot harder today than it wasthree or four years ago. In 2003 Rio Tintohad a market capitalization of roughlyUS$25bn. Today it is above US$100bn.Adding significant value to a companythat's nearly four times as big is a wholedifferent ball game.

“But we’re not going to allow themagnitude of the challenge to faze us,” headds with a smile.

Peter Brigg is a freelance business writer basedin Surrey, England.

Rio Tinto Review

20

Hot on the trail: a rig on the road to a drill site

at the Simandou project.

Colourful mineral samples that provide

clues to the existence of ore deposits.

22862_p16-20 22/2/08 15:49 Page 6

The world is shaped by the boundaries of people’s knowledge atany one time. It is intriguing to discover, in a single capsule, asnapshot 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 firstpublished and the first edition is now available in a three volumereplica (Encyclopedia Britannica, £99).

The replica offers hours of fascinating study, but the volumesare 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 orearth science, and even less about extractive sciences such asmining and mineral processing. But there are strands of truth thathold fast to this day, 250 years or so after publication.

Rio Tinto Review

21

At a moment intime Chris Morrissey

explores how onepublication enshrinesthe state of scientificknowledge, 250 years ago.

There was a hunger for scientific knowledge at that time,illustrated by huge popular interest in voyages of discovery thatCaptain James Cook was making in the Pacific. Cook made hisfirst landfall on the Great Southern Continent he had beenseeking in April 1770, but he did not get back to Britain till thefollowing July so the encyclopedia does not mention Australia orthe strange deer sized, hare flavoured animals (kangaroos) thatCook’s party found there.

Britain’s Industrial Revolution was in full swing, fuelled by theproducts of many hundreds of British mines. The Parys Mountainmine in North Wales (still making news in the twenty firstcentury) was getting into its stride as a major copper producer.The North Pennines orefield was churning out lead, and one lead

mine distinguished itself byproducing over 2,000 tons ofcontained metal in a singleyear. It is an insignificantamount now, but prodigious atthe time.

The first EncyclopediaBritannica was scrambled intoprint, a year behind schedule,by three enterprising Scotsmen(“a Society of Gentlemen inScotland”). Its editor was abrilliant young polymath calledWilliam Smellie whosescholarship was matched by hisfondness for roistering inEdinburgh drinking dens. Theother two were an engraver, anda printer who doubled as chiefsalesman. About 3,000 copieswere sold, at £12 for thecomplete work – 2,659 pagesillustrated by 160 copperplateengravings.

FrameworkThe aim was to summarize thescientific knowledge of the dayin a framework of long essaysset out in alphabetical order bydiscipline – Astronomy, Botany,Chemistry and so on.

Supplementing the essays wereshort dictionary style entries that

dodged from one discipline to another. Typically, the long essayon anatomy comes straight after an entry on Anatolia and anengraving of a whistling duck.

Smellie compiled the text from over 150 existing publications(“the best books on every subject”). He acknowledged his sourcesbut suited himself on which to use and how much to extract.Some of his choices seem rather odd now. Midwifery has morepages than mechanics and electricity put together.

There is no entry for Geology – it had only just been inventedas a word and was yet to be born as a science. Mines, however,were considered scientific enough to deserve a page of text. Amine is defined as “a place underground where metals, mineralsor 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 onlysix metals were recognized – gold, silver, lead, copper, tin andiron, plus eight so called semi metals that included platinum,nickel, cobalt and zinc. It was a hundred years before the Russianscientist Mendeleyev proposed the system of elementalclassification that gave us the Periodic Table. There are some

22862_p21 22/2/08 17:29 Page 1

telling absences, among them manganese (first isolated 1774),chromium (identified 1797) and aluminium (named 1812 butnot isolated as a metal until 1825).

Notes on how metallic elements occur again reflect aknowledge base that was tiny compared with today’s. Gold isdescribed as being found in ores of other metals but “there isno proper ore of it”. Platinum and nickel both get the samecomment: “Of its ores we know nothing”. Most ores of copperare said to be “a beautiful green or blue” (in other words,coloured by malachite, azurite, and other minerals normallyproduced by weathering). The chief ore mineral of zinc is givenas the carbonate calamine, which at that time was the mainsource 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 deepmining had been going on for hundreds of years. Examples itgives are the silver mines of Potosi (Bolivia) and Freiberg(Saxony), the Kremnitz gold mine in Hungary, and the tin-copper mines of Cornwall.

WisdomThere is a curious mixture of wisdom and wackiness in whatthe encyclopedia says about orebodies and how to find them.It would be an odd geologist nowadays who reckoned thatorebodies mostly take the form of veins or lodes and are neverperpendicular. On the other hand, many would agree thatvein structures “. . . seem to be, or to have been, the channelsthrough which the waters pass within the earth”.

On what it takes to find ore, the work comes within hailingdistance of modern views. First it says that there’s no point inwaiting for “favourable accidents” like floods and earthquakesto expose ore. Instead, you have to go and look for it. Tosucceed in finding it requires “a particular sagacity, or acquiredhabit of judging from particular signs, that metallic matters arecontained in certain parts of the earth”.

The chief signs of hidden mineral deposits are listed interms 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 togeobotany?). A more traditional sign is “finding of pieces of oreon the ground”; so called float searches still play a key role indiscoveries.

What do you do when no such signs can be found? Theadvice 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, theskilful mineralist usually bores into the earth, in such places asfrom some analogy of knowledge, gained by experience, or byobserving the situation, course or nature of other mines, hejudges to contain metal.”

There is much wisdom in those words, and in the adviceabout questions that had to be asked to assess a mineraldiscovery. The most basic question was whether the mineraldeposit could be “dug to advantage”, meaning mined at aprofit. Others concerned the availability of wood and water,the healthiness of the place and its topographic position. Theoverall conclusion was that “the best situation for a mine is amountainous, woody, wholesome spot”.

The questions have multiplied and become morecomplicated since that was written, but with mineraldiscoveries the big question is still the same as the one askedin 1768. Can it, realistically, be dug to advantage?

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

The postbag was pleasinglyfat after the December issueof “Review” appeared. Mostletters were appreciative,although we did receive agentle rap on the knuckles(quite rightly) for our failureto include on the map of RioTinto’s Australian railwaynetwork all the placesmentioned in the article.

Still on the trains, a readerwrote that he could see howiron ore was loaded onto thetrucks using gravity, but howdo we get it off again? Well,the wagons are locked in anenormous barrel-shapedcontraption called a cardumper, two at a time, whichthen turns them upside down.The ore shoots out on to aconveyor belt which whisks itto the shiploader, and so ontothe ships.

We found two lettersespecially intriguing, and bothwere triggered by our featureby Dan England that looked atmining through the eyes ofnovelists over the years.

The first is from ashareholder, Aline Puxley,who lives near Newbury inBerkshire, England and writesabout one of the booksmentioned: “Hungry Hill wasbased on my husband’s familyand Copper John was hisgreat great great grandfather.Daphne du Maurier wasbilleted on Henry Puxley inHertfordshire and read thepapers relating to the copper

At a moment in time

Rio Tinto Review

22

you write

22862_p21 22/2/08 17:29 Page 2

mines at Allihies in CountyCork.”

The papers are now in anew mining museum atAllihies – but in them DuMaurier had found theinspiration for her epic 100year adventure story offeuding men (Brodricks vDonovans), voluptuouswomen, fighting and death inIreland’s violent days.

The Cornish MiningHeritage website tells howthe history of the mines isinextricably bound up with thePuxley family which was ofEnglish origin with Galwayconnections. John LavallinPuxley (“Copper John” in thebook) formed the AllihiesMining Company in 1812 andstarted work at Doneen where“a quartz vein showing thetelltale green signs ofsecondary copper stainingextends into the sea and maystill be seen today”.

The Brodrick’s home in thebook is Clonmore – in reality,Dunboy Castle where thePuxley family lived. Onejournalist described it as“probably the greatest housein all Ireland, mixing thestyles of French chateaux andthe practical sturdiness of anold English Manor”. DuMaurier did not need to inventthe scenes at the end of thebook when it is burned down.As in fiction, so in life: thecastle was torched by IRAterrorists in 1921. It has now

been rebuilt and is reopeningas a luxury hotel.

There’s a further twist inMrs Puxley’s tale. In 1950 herfirst cousin, Lorna Archer-Houblin, married Rio Tintochairman Val Duncan, one ofthe mainsprings of theGroup’s growth at that time.

The other letter thatcaught our special attentionwas from Michael West,formerly chairman of MiningJournal in the UK.

“I have read the December‘Review’ with usual interestbut have been surprised by anomission in the article byDaniel England.

“There is a thriller aboutmining in Australia byHammond Innes that shouldmerit inclusion. However,more than that, it was all butsponsored by Rio Tinto Zinc inthe early seventies at thetime when Val Duncan waschairman. Hammond Inneswas encouraged to go toAustralia and was givenconsiderable help in travellingaround in the mining areas.

“I am aware of this as itwas my turn to be presidentof the Royal School of MinesAssociation in 1972 and ValDuncan was the leadingspeaker and Hammond Innesreplied on behalf of theguests. Part of the amuse-ment of the evening was thatHammond Innes had port-rayed a Royal School of Minesgraduate in Australia in a very

poor light; indeed hepresented him in the book asa crook!”

The book is called GoldenSoak (Collins 1973, publishedin paperback by Pan 1996). Itis a thriller set in the Pilbaramining area at the time of thegreat nickel adventures of theearly seventies. The plotseems laboured by today’sstandards but there’s lots ofauthentic mining detail andthe climactic scenes in thescorching heat of the deserts,as the narrator searches for amissing miner, are vivid andabsorbing indeed.

Finally, how could we resistpublishing extracts from thisletter from a shareholder,Rory Darling, who lives inOxfordshire, England?

“I receive a number ofsimilar publications whichare so dull by comparisonwith your magazine . . .

“Rio Tinto is a companythat many in the UK knowlittle about as most of itsoperations are abroad andyour magazine is the mainpoint of contact that smallshareholders have with theorganization – and yourarticles are always access-ible for those of us who arenot familiar with what thecompany does.

“I am appreciative, andthank you for the thoughtfulway you have produced adiverse and comprehensivereview.”

Rio Tinto Review

23

we read

Ghostly remains: Dunboy

Castle, destroyed by fire

in 1921.

22862_p21 22/2/08 17:29 Page 3

22862_Cover 22/2/08 17:31 Page 6

Documents

RioTinto Mar 08