Rio, FMG trade barbs
The war of words over the lagging iron ore price took another turn today, with Rio Tinto iron boss Andrew Harding and Fortescue Metals Group chief Nev Power exchanging barbs at two separate events.
Speaking at stockbroker Morgan's business breakfast this morning, Mr Power accused Rio Tinto and BHP Billiton of adopting a damaging expansion strategy in the Pilbara that would flood the iron ore market with expansion tonnes.
He said it would lead would lead to "self inflicted wounds" and falling shareholder returns.
Mr Power described the massive Pilbara expansion by the big two miners as a "flawed strategy" and likened it other disastrous multi-billion dollar investments from the two big miners.
"I'm somewhat amused by the recent rhetoric of this last man standing strategies we hear about," Mr Power said.
"I'm not quite sure why anyone would want to be the last man standing in a low price, low-return environment," he said.
"For me, what we're interested in the iron ore industry is to ensure we've high returns to our shareholders. And when there high returns in the future by investing we should invest, and when we don't see those incentive prices and returns we shouldn't invest.
"Investing because you're more profitable than the next guy seems to be a very flawed strategy to me, and one that will inevitably lead to self-inflicted wounds, low returns to shareholders, and probably replacement of management teams like we've seen in some of those companies in the past," he said.
Rio Tinto iron ore boss Andrew Harding hit back at a CEDA event this afternoon, suggesting Fortescue executives should have more concern for their jobs, rather than the senior management at its competitors.
"I'm not at all worried for my own job, but it clearly is topical for Nev," Mr Harding said.
"We both commenced our most recent expansion in 2010, and Rio Tinto is producing a very high quality product, a much higher quality product, at a lower cost. So I can see why Nev is a little bit distressed, and possibly even panicking."
Mr Harding rejected criticism that Rio was adding tonnes to pressure its competitors with higher costs, saying the company, Australia's biggest iron ore producer, was using its local assets to deliver the best return to its shareholders.
Both Rio and BHP Billiton came usder fire this week, with Premier Colin Barnett accusing the two giants of acting "in concert" to push the iron ore price down and squeeze out competitors.
Mr Barnett backed down slightly yesterday, saying he did not mean the two miners were working together but rather they were both pushing down prices through their own individual policies.
