br-01-2.jpgRio Tinto is eyeing Zambia according to Business Week’s latest topical issue … the sole owner of the world’s largest open pit mine located in Kennecott Utah in the United States of America and, one of the leading mining companies in the world, which employs 34,500 people in 40 countries is looking at Zambia with a critical eye.

Rio Tinto’s worldwide operations supply a wide range of minerals and metals, including gold, silver, coal, iron, aluminum, borates … and, of course, copper.Copper remains the biggest money spinner, generating 48% of Rio’s profits in 2006. Some experts expect that portion to fall to about 30% in the next few years as prices come off their highs. Iron ore, which accounts for about 30% of profit currently, will become an increasingly important part of the mix, thanks to China’s voracious demand for steel.

Rio Tinto has poured money into acquisitions and new exploration projects to sustain growth. Last year alone, Rio boosted capital investment by 56%, to $3.6 billion, helping it secure the No. 3 spot on this year’s BW50 list of top European companies. It has become one of the titans of the mining industry, second only to Anglo-Australian rival BHP Billiton (BHP), with interests in copper, iron ore, coal, uranium, and diamonds.

Experts estimate the high commodity prices—which so far show no sign of tumbling—could give the company a net cash balance of about $4 billion by the end of 2008. That gives it a lot of firepower for more deals. Russia, Zambia, and the Congo are all regions where Rio could make a move next …

A look at the company’s selected financial data and revenues shows that it’s consolidated annual revenues for fiscal year 2006 exceeded $25.4 billion, with EBIT (earnings before interest, taxes, depreciation and amortization) at $12.7 billion while capital expenditure was well over $3.9 billion. Margins underlying/adjusted earnings before interest and taxes stood at 42.2% as a percentage of gross sales and they have consistently reduced their net debt down to $11.1 billion from $41.1 in just four years.

The real question however is whether the government responsible for the Zambian Enterprise will take advantage of the above spending power and do all they can to make sure Rio Tinto comes through with their considerations – thereby making Zambia a fortress for FDI (Foreign Direct Investment) it should be … thanks a trillion 

Brainwave R Mumba, Sr. 

CEO & President – Zambian Chronicle 

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