Chapter 363: Rampaging in the Mining Market
Hu Shitan, carrying a thick stack of contracts, boarded a flight and arrived at Rio Tinto's headquarters in Singapore.
Rio Tinto maintained several headquarters globally, including locations in Singapore, London, and Perth. The Singapore office primarily oversaw the global iron ore sales market.
Hu Shitan's direct supervisor was Alexander, President of the Global Market Center. This time, however, Alba was also present, accompanied by the Chief Financial Officer, Eric.
"Iron ore, bauxite, and copper—these are the commodities in the mining world with the highest demand!" Alba proclaimed confidently. "We at Rio Tinto are firmly committed to diversification to enhance our resilience against market risks. Nevertheless, we must also choose the right path for diversification! Over the years, the group has shed smaller operations like nickel, coal, and zinc to focus on our three core businesses: iron ore, bauxite, and copper. The market has clearly demonstrated that our decision was correct."
"This year, copper's profitability has exceeded all other minerals, becoming an absolute profit-generating beast," Alexander said with a sigh. "Unfortunately, our copper operations remain too weak. Compared to our global competitors, our copper market share is severely lacking. If we aim to challenge BHP Billiton, we're still far behind. BHP's Escondida Copper Mine in Chile alone produces more than a million tons of copper annually. All our copper businesses combined don't even reach half the output of that single gigantic mine. To significantly influence the copper market, we desperately need one or two large-scale copper mines."
This sentiment was entirely correct.
Recently, Rio Tinto had been actively scouting for acquisitions in the copper sector and had previously targeted Falconbridge. Unfortunately, Xstrata made its move earlier, swiftly acquiring it, leaving no opportunities for Rio Tinto.
With international copper prices soaring to $8,400 per ton, Rio Tinto had not significantly benefited from this bull market. Meanwhile, competitors like BHP, Freeport-McMoRan, and Xstrata made massive profits through copper.
For instance, BHP's latest quarterly financial statements revealed that copper profits accounted for over 30% of their total earnings!
Current market prices indicated copper was even more profitable than iron ore, perhaps twice as lucrative.
How frustrating!
Rio Tinto, lacking any major copper mines, couldn't increase production or develop new projects quickly enough to fully capitalize on the ongoing copper price surge.
"We've closely monitored the situation in Chile and Peru. If an opportunity arises, we'll swiftly acquire one or two major copper mines to significantly boost our market position," Alba said firmly.
Alba was aware that Rio Tinto aimed to establish three equally strong core businesses. Iron ore was already solid, ranking second globally behind Vale, with potential to surpass them soon.
Regarding bauxite, Rio Tinto had acquired several alumina companies in Australia a few years earlier, expanding into a substantial business. Although not as dominant as iron ore, it still held significant global market share and had aspirations to surpass giants like Rusal, Alcoa, and Alcan, aiming for global leadership and greater pricing power.
Copper was their weakest link—despite their ambitions, few suitable acquisition targets emerged on the market, and those available came at exorbitant prices.
"I recently met some people from BHP. They're increasingly focused on the global copper market. Interestingly, an insider revealed that despite BHP's dominant global copper position, their CEO Chip Goodyear faced criticism from their board," Alexander shared some insider news.
"How could the board criticize Goodyear when their copper business has generated so much profit?" Alba envied Goodyear deeply. Goodyear hadn't done anything particularly impressive with copper—previous management had built their success. Now, he simply reaped the financial rewards of soaring copper prices.
"Because of the Talego Copper-Gold Mine!" Alexander said with a humorless laugh. "Previously, Goodyear personally approved selling the exploration rights to the Talego Copper-Gold Mine for just $8 million. That same mine is now nearing production, and unofficial appraisals currently value it at more than $10 billion! If this giant mine were available today, at current copper prices, companies would be scrambling desperately to acquire it."
"True, Falconbridge sold for $16 billion. Talego, a world-class copper-gold project soon entering production, would easily fetch at least $10 billion—quite reasonable," Alba said regretfully, dreaming of acquiring such a mine.
With over 30 million tons of copper reserves and more than 3,000 tons of gold, Talego Copper-Gold Mine represented tremendous value. Acquiring it would guarantee tens of billions of dollars in revenue annually over the next 50 years—truly an endless flow of wealth.
Sadly, Talego's rights fully belonged to Zhongcheng Mining, an unlisted Chinese company backed by the massive domestic market. Foreigners simply had no chance of acquiring it.
"Recently, massive news emerged from the Democratic Republic of the Congo (DRC) in Africa, revealing a giant copper deposit discovery: the Kakula copper mine, containing 20 million tons of copper reserves, with over half being high-grade ore averaging 5.2%! Even the overall average grade is above 2.5%," Alexander continued, excitedly sharing his insights.
Although he handled marketing and sales, Alexander closely followed upstream developments. He immediately thought of Kakula as a prime acquisition opportunity. If Rio Tinto could buy such a world-class copper mine, their copper business would instantly vault into the global top five, significantly enhancing their market influence.
It was undoubtedly tempting—a prize worth coveting!
Rio Tinto already had smaller copper operations in Congo, so they had some experience there.
"Do you know who owns the rights to Kakula Copper Mine?" Alba suddenly asked.
"Canada's Ivanhoe Mines, owned by famous exploration expert Friedland!" Alexander replied immediately, having closely tracked Ivanhoe's announcements.
"You overlooked a key detail. Half of Kakula's rights belong to Li Tang from China!" Alba grimaced, visibly agitated. "He's incredibly tough to negotiate with—like dealing with stone!"
"Li Tang?" Alexander hadn't paid much attention previously. "The mysterious owner behind Winning Mining?"
"Exactly him!" Alba shook his head bitterly. "We've approached Friedland about acquiring his 50% stake in Kakula."
"What did Friedland say?"
"He told us to negotiate with Li Tang," Alba said helplessly.
"That doesn't sound like Friedland at all," Alexander frowned, knowing Friedland's reputation well. "He usually sells his exploration discoveries at peak prices. With copper at a historic high, it's clearly the perfect time to sell."
"Indeed, but even Friedland now wants to mine copper himself," Alba mocked sarcastically. "Apparently, everyone thinks developing a mine is easy money nowadays."
"He probably sees China's rising market and wants to leverage Chinese capital for Kakula's development," Eric, who had been silent, finally spoke up when discussing financial aspects.
"Let's move on. Let's discuss iron ore," Alba said irritably. While he desperately wanted to expand copper operations, reality proved frustrating. At least with iron ore, he felt better, as Rio Tinto ranked second globally, eyeing the top spot.
"A recent announcement by Ivanhoe Mines revealed another significant discovery: they struck iron ore at their Mary River project—another mega-deposit!" Alexander eagerly shared the latest news.
"What?" Alba suddenly felt anxious. He'd been so occupied with iron ore price negotiations lately, detached from exploration news. He remembered previously dismissing rumors about Mary River, claiming exploration had barely started and no significant discovery had been made. Yet within a year, confirmed news arrived.
He also remembered clearly: Li Tang held the majority stake in Mary River, Friedland merely held 20%.
Another super-giant deposit involving Li Tang?
"What exactly is going on?" Eric asked curiously, similarly unaware.
Seeing their shocked reactions, Alexander felt proud, explaining clearly: "Mary River discovered nine ore bodies so far. Exploration concentrated mainly on Ore Body No. 1, where over 300 million tons of high-grade (around 67%) iron ore reserves were found within 200 meters of the surface. Most of the ore is directly exposed at surface, stretching nearly four kilometers!"
"Three hundred million tons?" Alba quietly sighed in relief. That amount wouldn't greatly impact the iron ore market or threaten Rio Tinto.
"But that's just the shallow reserves of Ore Body No. 1. Ivanhoe reported aerial magnetic surveys identifying an iron-bearing belt stretching over 60 kilometers, with an estimated shallow resource exceeding 6 billion tons!" Alexander emphasized seriously. "If they continue exploration, Mary River's shallow reserves alone would be staggering!"
Alexander opened his laptop, pointing to reports: "Top geologists in Canada have publicly stated Mary River might break records for global iron ore reserves. Moreover, the quality is unmatched worldwide, with most deposits exceeding 60% iron content!"
He noticed Alba and Eric's stunned silence and added firmly: "Currently, Mary River is Canada's largest iron ore discovery ever!"
European steel mills had tested Mary River ore samples, achieving outstanding results. Experts confirmed Mary River contained the world's highest-quality undeveloped iron ore.
What more was there to say?
Alba stared at the screen, overwhelmed, eventually slumping into his chair in stunned disbelief.
Rio Tinto owned no comparable mine—nothing even close to this size or quality. Even their largest subsidiary, Hamersley Iron, operated mines mostly measuring just hundreds of millions of tons. Deposits exceeding one billion tons were rare.
The shock was profound.
Moreover, after decades of mining, many mines were already facing resource depletion. Most of these mines had an average iron ore grade in the forty to fifty percent range, with only a few being considered high-grade, exceeding sixty percent.
Mines like Mary River, boasting high-grade ores, vast reserves, and shallow deposits, were exceedingly rare.
"Is there really six billion tons?" Eric was stunned for a moment before voicing his biggest doubt.
"It's a prospective resource estimate. We'll need more detailed exploration results in the future," Alexander explained, having only superficial knowledge about exploration techniques but understanding the concept.
"It's very odd. If the deposit is so huge and exposed at the surface, why didn't anyone in Canada previously apply for mining rights?" Eric asked, increasingly puzzled.
"Mary River Iron Mine is located on Baffin Island, within the Arctic Circle, where it is covered by ice and snow all year round and extremely cold," Alexander pointed out. He had praised Mary River extensively but also recognized its disadvantages. "This mine has a harsh environment, making development challenging. Even exploration work is difficult. I've heard the project's exploration has slowed down, and they don't plan to fully define the entire six billion tons of prospective reserves."
"Sigh…" Alba felt a turmoil in his heart, like a flood had swept through, leaving chaos behind. However, being an experienced executive, he quickly steadied himself.
"Li Tang again!" Alba sighed deeply.
"Li Tang owns 80% of Cold Iron Company," Alexander noted, clarifying the ownership situation. "If Li Tang is indeed as difficult as you say, it will be extremely tough for us to get involved with Mary River."
"Even if there isn't a clear opportunity, we still must try to create one," Alba said, feeling conflicted. On one hand, he was shocked by Mary River's data; on the other hand, he was already contemplating the implications for the future.
If Mary River truly contained six billion tons of iron ore, then Li Tang, this Chinese businessman, controlled an alarming share of global iron ore reserves! He also owned Simandou, another enormous, high-grade mine.
The world's two largest and highest-quality undeveloped iron ore mines were both under Li Tang's control.
Should these mines enter production, they would unleash a flood that would completely overturn the existing international iron ore order. Even established giants like Vale, Rio Tinto, and BHP could be submerged beneath this torrent.
Alba genuinely feared Li Tang would aggressively ramp up iron ore production, destroying the seller's market that had rarely emerged. The iron ore market might revert to the prolonged stagnation reminiscent of the last century.
Just as they were discussing these matters, Hu Shitan hurriedly arrived. "Sorry for the delay, executives, my flight was slightly delayed."
"You're half an hour late," Alba glanced at his watch, slightly irritated. They had specifically been waiting for Hu Shitan.
"I was finalizing this year's long-term contract prices with several steel enterprises, causing some delays. Actually, I could have arrived yesterday, but more customers showed up this morning," Hu explained, smiling broadly and apologizing profusely.
Although Alba appeared visibly annoyed due to the delay, Hu continued smiling obsequiously. He had no choice, as his future authority within Rio Tinto hinged entirely on Alba's favor.
These past few years, iron ore had been in high demand, and many steel executives had approached Hu with lavish gifts, bribes, or even women, employing every imaginable tactic. As Rio Tinto's representative in China, Hu had thoroughly enjoyed the privileges, luxury, and respect of his position, gaining more material wealth in just a few years than his entire earlier life combined.
Despite this, Hu remained unsatisfied.
He wanted Alba to grant him even greater authority—to negotiate and sign contracts independently with Chinese steel companies and control every aspect of iron ore delivery.
Hu had previously suggested this to Alba, arguing it would enhance Rio Tinto's operational efficiency, allowing greater flexibility and increased profitability.
However, Alba had yet to agree.
"Here are the contracts already signed by the companies. Mr. CEO, they still require your signature," Hu bowed as he handed them to Alba.
Hu's primary desire was to have his own signature on these contracts officially recognized by the company. But at present, Alba or Alexander's signature was still required for validity.
Alexander took the contracts, briefly reviewing them, confirming these were indeed the agreements they had previously negotiated with Chinese steel mills. They'd specifically instructed Hu to personally deliver these contracts to ensure their security.
"Excellent work, Hu!" Alexander praised.
Hu's smile widened immediately, nearly reaching his ears. "I'm honored by your support, and I promise to work even harder in the future to repay your trust!"
Alba remained stoic, asking, "How has the Chinese market been recently?"
"Many steel companies have approached me, begging for iron ore, offering substantially higher prices than last year's benchmark," Hu boasted eagerly. "Late last year, rumors suggested Chinese steel mills had inventory issues and steel prices had fallen significantly. However, from raw material demand alone, steel companies still urgently need iron ore! I guarantee the Chinese steel market's iron ore demand is still growing rapidly—faster than global production increases!"
"Good," Alba finally smiled approvingly. "I'll reconsider the authority request you previously submitted. In the meantime, you must perform exceptionally. China is now Rio Tinto's largest market, and we cannot afford mistakes!"
Hearing this, Hu envisioned a brighter future, enthusiastically replying, "Please rest assured, Mr. CEO, I promise to fulfill my duties perfectly!"
Alba smiled slightly, then asked, "Have you recently met Li Tang?"
"No," Hu answered, puzzled at first, then quickly recalled, "But I've heard recent news about him. Winning Mining's iron ore just arrived at Haigang Port, with extensive media coverage. Li Tang should currently be in Haigang City."
"You've heard about Mary River?"
"Yes, I was about to mention this matter," Hu replied hurriedly. Alba considered for a moment before asking directly, "Can you arrange a meeting with Li Tang to discuss cooperation regarding Mary River?"
Hu hesitated, not wanting to contradict Alba or disappoint him, but he knew the request was almost impossible.
"I learned yesterday that Li Tang, while intoxicated, openly stated Mary River Iron Mine would soon enter development. Several steel companies immediately volunteered funding for joint development," Hu cautiously observed Alba's reaction before continuing. "Li Tang also revealed Winning Mining's Qiche mine had just entered production, and they plan a massive capital raise for the development of their Yumi mine."
Alba remained silent, contemplating deeply.
"Winning Mining has begun production with support from state and federal governments; we can't stop it now. But if they continue expanding production, they'll pose a huge threat," Hu provoked deliberately. "Mary River Iron Mine is massive—potentially holding billions of tons of reserves! If developed successfully and steadily increasing production, China's market may become entirely self-sufficient through Li Tang's help! Self-sufficiency has always been deeply rooted in China's traditional small-farming mindset. They're making every effort in that direction."
Hu, now an Australian citizen, naturally spoke from an outsider's perspective.
Noticing Alba's increasingly serious expression, Hu further dramatized, "At that point, Rio Tinto would completely lose the Chinese market! We'd lose over 100 million tons of iron ore sales annually, directly halving our yearly financials!"
This was undoubtedly exaggerated alarmism, yet it perfectly aligned with Alba's existing concerns, making Hu's words believable.
"Indeed, it's a serious threat," Alba said gravely. "The Chinese won't play fair—they'll certainly disrupt the market!"
"Absolutely!" Hu echoed emphatically. "Especially Li Tang—he's been rampaging across the mining market like a barbarian!"
Alba nodded solemnly, "I'll come up with a plan."
…
Li Tang woke up in the morning to find Dai Yingchi asleep on the living room couch.
"Why are you sleeping here?" Li Tang asked, puzzled. "Didn't the company book you a room?"
Startled awake, Dai jumped up immediately, towering at nearly two meters tall. Seeing Li Tang, he relaxed. "You're awake. Feeling alright?"
"Just a bit dizzy; still feeling the alcohol," Li Tang replied. Glancing down, he realized he was standing in just his underwear and felt embarrassed. He had assumed he was alone and hadn't paid attention.
"Good to hear," Dai said sleepily.
"You took care of me all night?" Li Tang asked, having no memory of the night before.
"No, Alice took care of you initially. She probably removed your clothes," Dai replied honestly.
Hearing this, Li Tang quickly checked himself, relieved to see no embarrassing stains. He probably hadn't done anything embarrassing.
"I drank too much. Never again," Li Tang sighed, embarrassed.
"You vomited all night; Alice helped the whole time. Later, worried you'd choke, she asked me to help."
"Thanks."
"When I arrived, you had finished vomiting. Alice went to rest afterward, and I just slept here," Dai explained.
"I'll get dressed; go freshen up. Let's have breakfast," Li Tang suggested, feeling hungry now that his stomach was empty.
At the hotel restaurant, Alice and others were already having breakfast. Seeing Alice, Li Tang felt embarrassed, recalling her struggles the previous night.
Noticing his gaze, Alice huffed indignantly, "Humph!"
"Sorry," Li Tang apologized sincerely. "What gift do you want to thank you?"
"Buy me the most expensive clothes! You vomited all over me!" Alice snapped, blushing.
"I did? How's only your underwear dirty?" Li Tang wondered, astonished at his drunken "precision."
"You're a terrible man!" Alice scolded furiously, burying herself angrily in breakfast, utterly humiliated by the memory.
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