Rio Tinto sees ops robust to weather crisis

FORT DAUPHIN, Madagascar, Nov 2 (Reuters) - Global miner and takeover target Rio Tinto sees most of its projects in a strong position to weather any economic scenario, with its new ilmenite project on track to produce in 2008, it said on Sunday. Chief Executive Tom Albanese said the $1 billion ilmenite project in Madagascar was a good example of a project undeterred by the crisis. "This is pretty much how we are with most of our businesses ... we have the benefit of large long-life, low-cost operations," he said during a media visit to the project in the southeast of Madagascar. The project's head said earlier on Sunday that the mine would start operating by the end of this year as planned, with annual output expected to reach 750,000 tonnes by 2011-2012 and up to 2.4 million tonnes eventually. Albanese said that while it sees the financial crisis keeping demand for its products down at least through 2009, it sees the long-term demand picture unchanged. The company bets on a strong rebound in China, the main driver of soaring demand for coal, steel and other commodities. "We are seeing China taking a pause for breath," he said, adding there were signs of further slowdown in the fourth quarter, but added that the 8 percent to 9 percent growth forecast for China for next year was realistic. "We hope with monetary stimulus to see some recovery in China's GDP in 2009," he said, also betting on China's restocking of copper inventories to boost demand. BHP'S BID Albanese rejected the notion that the financial meltdown might force it to run into the arms of BHP Billiton, which has made a hostile bid for its rival. "Our response to the BHP bid does not change," he said. The CEO declined to comment on how metals prices would develop in 2009, but said Rio was ready to act, if necessary. "We are trying to keep ourselves in a position where with those relatively low prices our businesses continue to be robust ... we are ready to make tough decisions, if necessary," he said. He would not comment on whether the company was planning to cut iron ore output, unlike Brazilian mining giant Vale which said on Friday it would cut its own output of the metal 10 percent from November. Rio Tinto said in turn it would rethink its capital projects around the world to either cut costs or delay them, with those at an early stage of development being a first target. It also delayed its plan to sell $10 billion in non-core assets by year-end until the credit markets have returned to normal. But Albanese said that supply was still tight as smaller peers suspended mines or delayed new projects and he expects some of the idle capacity not to return when markets rebound. "We are in an environment where supply continues to be constrained," Albanese said. A tight market and strong demand from underlying industries are the reasons why the ilmenite mine in Madagascar, which nears its completion, will go ahead as planned. Ilmenite is a source of titanium dioxide, a white pigment used in paint and other coatings, paper, plastics and cosmetics, and for titanium metal. QIT Madagascar Minerals (QMM), which runs the project and is 80 percent owned by Rio Tinto and 20 percent by Madagascar, sees demand tight especially for the high-grade feedstock to be produced in Madagascar. It said a mine the size of the Madagascar one would be needed every three to four years to meet global pigment demand.