UPDATE: Rio Tinto CEO: Short-Term Economic Outlook A Concern

11th Jun 2010 18:54

By William Horobin Of DOW JONES NEWSWIRES PARIS (Dow Jones)--Mining giant Rio Tinto's (RTP) chief executive Friday said he remains concerned about the economy in the near term as structural defects following the financial crisis continue to work their way through the system, though he sees as positive the economy's medium- and long-term prospects. "We have an intermediate- and long-term outlook that's quite positive because we are looking at steady and strong demand for our products from China," and industrialization and urbanization of other emerging markets such as India and Southeast Asia, CEO Tom Albanese told Dow Jones Newswires on the sidelines of the 10th International Economic Forum on Africa, hosted at the French Finance Ministry. "However, in the nearer term, I am concerned about the structural defects that are still in the world's economy." Albanese said the problems affecting some countries in southern Europe and pressuring the euro are just one example of such short-term concerns. The chief executive said some tightening of China's economic growth is needed, however, to prevent a return to the inflationary pressures that existed in 2007. "I do think that will slow what is a strong economy, but it will still continue to be robust for our business," Albanese said. He said that he has been advising Rio Tinto managers to be prepared for higher levels of volatility than in the past. Albanese also said he expects negative and positive cost pressures from foreign exchange volatility that the company will have to deal with on a month by month basis. The CEO also suggested he would like to see Rio Tinto invest more in Africa. "Our total business in Africa is probably less than 5% of all of Rio Tinto," Albanese said. "I would say on balance that we are underinvested in Africa compared to where I'd want to be, given the great potential in Africa." Albanese's comments come as mining companies voice concerns over the Australian government's proposal to impose a 40% tax on natural-resources companies. At the conference earlier Friday, he said the proposed policy would create an opportunity for Africa, if it goes ahead in its current form. "When new taxes, or new silent partners, are imposed on anyone without consultation, the first thing to express concern about is this being bad policy," Albanese told Dow Jones. "I would say that this proposal is bad policy." Still, he said Rio Tinto is willing to negotiate changes in taxation and urged for a more holistic approach to such reforms. "I do want to invest in Australia, I do have a lot of optimism about the Australian economy. We would want the fiscal regime to continue to be seen as stable and competitive," he said, adding he believes Rio Tinto is already paying fair taxes at a 35% rate. Concerning a proposed iron ore joint venture in Western Australia's Pilbara region with BHP Billiton Ltd (BHP), Albanese said the miner has had "good engagement" with regulators, who are yet to give their green light. Asked if the terms of the joint venture will have to be renegotiated due to the regulatory delay and the rise in iron ore prices, Albanese insisted on the importance of the deal for both companies. "The important fact is the synergies are very large and very important for both companies." -By William Horobin, Dow Jones Newswires; +33 1 4017 1737; [email protected] (END) Dow Jones Newswires June 11, 2010 13:54 ET (17:54 GMT)