The Australian reported that Mr Tom Albanese chief of Rio Tinto reckons fears about the state of the global economy are overblown. He may want to consider talking to his major shareholder, who appears to view the world very differently.
Around the time Mr Albanese was hitting the hustings in Korea last week to push his rosy prognosis, China's state owned aluminum giant Chinalco Rio's major shareholder courtesy of its 12% stake in the mining giant was presenting a very different view.
Chinalco and its publicly listed arm Chalco have been active acquirers in the resources sector in recent years but the public comments made by Mr Xiong Weiping GM of Chinalco last week suggested a new found conservatism in the face of worsening economic conditions.
Mr Xiong said that it would now strictly control project investments and take a prudent approach to acquisitions. In addition, the company would get well prepared to counter tough challenges as part of its steps to ensure its financial safety in the current volatile market. We should stick with the principles that cash is king and investment return is the priority.
The comments signal a shift in attitude within the historically acquisitive Chinalco and an acknowledgment from one of China's biggest companies that the current fear gripping world market stands to have a real impact on China's economy. They sit in contrast to the comments from Albanese, who told Bloomberg during the week that the plunging stock markets of the past few months did not reflect what was happening in the real economy.
Mr Albanese said that "My sense is that the expectations are actually more gloomy than what is taking place on the ground. From what I'm seeing, the actual real economy is probably doing better than the financial markets are worrying about."
He said that since his warning in September that commodity markets were weaker in anticipation that the problems in Europe and North America would hurt metals demand, Rio had seen through its businesses that the general economy is going OK, even in the US. OK may not be the most enthusiastic of adjectives, but it's certainly a more positive description than many commentators are using to describe the global economy. So who is right and who is wrong?
Certainly there will be those who will see the comments from Chinalco as a classic piece of foxing. The cynically minded would say there's no clearer signal that China is going to buy assets than when it is out actively talking down the market. The sceptics would also note that this downturn has been minor for Chinalco's listed arm in comparison to the carnage of the GFC.
Rio ended up pulling out of that politically sensitive deal in favor of an iron ore joint venture with BHP Billiton, which never got off the ground due to regulatory problems. By the time the BHP deal fell over, commodity prices had recovered and Rio was back on a healthy footing.
Chinalco's involvement with Rio didn't end there with the company last July agreeing to pay USD 1.35 billion to partner Rio in the huge Simandou iron ore project in West Africa.
There's more than enough evidence to suggest that Chinalco's new found prudence is not a China wide phenomenon including Sinopec's launch last week of USD 2.1 billion bid for Canadian shale gas company Daylight Energy and Sichuan Hanlong's offers for Australian-listed duo Sundance Resources and Bannerman Resources and China Guandong Nuclear's recent re engagement with the owners of the huge Husab uranium deposit in Namibia.
(Sourced from the Australian)
