Rio Tinto (RTP-N, RIO-L) plans to get stronger and thwart BHP Billiton’s (BHP-N, BLT-L) hostile takeover bid the old-fashioned way — through organic growth.
Rio says it will spend US$563 million to further develop the Diavik diamond mine in the Northwest Territories and ramp up iron-ore production.
Rio has a 60% stake in Diavik, with Toronto-based Harry Winston Diamond (HW-T, HWD-N) (formerly Aber Diamond) owning the remainder. The two companies say the money is going towards developing an underground mining phase at Diavik that would yield diamonds by 2009 and continue beyond 2020.
Additionally, Rio says it will ramp up iron ore production to 600 million tonnes a year and pump US$2.4 billion into getting two iron ore deposits in Western Australia into production.
The announcement comes on the heels of the London-based mining giant’s rejection of BHP’s US$150-billion takeover bid.
In a statement, Rio’s chief executive Tom Albanese said the offer doesn’t reflect the full value of his company’s current assets or its project pipeline — which Albanese says is better than Rio’s competitors.
Talk has also surfaced from China that a consortium including China Investment, Shanghai-based Baosteel Group, and other, smaller steel companies, were readying a US$200-billion bid for Rio Tinto.
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