Rio Tinto, the Anglo-Australian mining giant which recently rejected a takeover bid by rival BHP Billiton, is better off alone and poised to grow on the back of heavy investment into new mines and increased targets for divestment, according to its chief executive, Tom Albanese.
The company is to pump $2.4bn into the development of iron ore deposits in Pilbara, Western Australia, taking annual production to 430 million tonnes in the next decade.
At an investor meeting in London, Mr Albanese revealed revised synergy targets from Rio's acquisition of Alcan, the aluminium producer, which is now set to deliver $940m by 2009, up from $600m announced at the time of the transaction.
Mr Albanese said that Rio was "under-appreciated" and that, considering the company's asset base and options for growth, BHP's offer, which proposed 3 BHP shares for every Rio share, was "not even coming close".
"While BHP may need Rio Tinto, Rio Tinto doesn't necessarily need BHP," he told reporters. "The rise in global mineral demand is a trend we expect to continue for decades because of fundamental demographic and economic shifts, especially in developing economies like China and India. We believe that the value in Rio Tinto is to be fully reflected by the market."
The company has raised its divestment target to $15bn, up from $10bn, after a strategic review which highlighted up to $30bn of potential divestments. In addition to selling its Energy America and Alcan Packaging business, it will move Alcan Engineering Products out of its portfolio.
Rio Tinto will increase its 2007 dividend by 30 per cent, projecting a further 20 per cent increase in the following two years.
"It would seem they have not chosen to address the BHP approach, instead focusing on their own very strong growth prospects," said Michael Rawlinson, of the investment bank Liberum Capital.
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