Rio Postpones Investor Meetings on Financial Crisis

By Rebecca Keenan and Jesse Riseborough

Nov. 14 (Bloomberg) -- Rio Tinto Group, trying to prevent a $65 billion hostile takeover by BHP Billiton Ltd., delayed investor meetings scheduled for this month in Sydney and London so it can weigh the effects of the global financial crisis.

``We will review the timing early in the new year when we can better assess the impact of recent market turbulence on our short- medium term plans,'' Amanda Buckley, spokeswoman for the London- based company, said today by phone from Melbourne. Rio had planned to hold financial community seminars in Sydney on Nov. 25 and in London on Nov. 27, she said.

The world's largest mining companies are cutting output and reviewing investment plans as the global economy slows and commodity prices decline. Rio this week cut its 2008 iron ore output target by 10 percent after saying last month it may delay $10 million of asset sales and would review project spending.

``It's going to be a difficult time to update the market,'' said Tim Barker, who helps manage more than $54 billion of assets at BT Financial Group in Sydney and was due to attend the briefing. ``It is not a good time for them, given the position they are in with BHP. They have their back to the wall, fighting off what appears to be a strong competitor with a competent attack.''

Shares of Rio rose 4.4 percent to A$72.00 at the 4:10 p.m. Sydney time close on the Australian stock exchange. It's trading at a 22 percent discount to BHP's all-stock offer, which it rejected in February as too low.

Cut Earnings

Rio, the second-largest iron ore exporter, became Australia's biggest corporate credit risk as banks bought protection to hedge their loans, credit-default swaps show. The cost of protecting mining companies' debt from default has been rising since September, when concern about the global economy caused oil and commodity prices to tumble.

Rio's earnings this year may be reduced by 9 percent because of the iron ore cuts, UBS AG said this week. Iron ore accounted for about 30 percent of Rio's sales last year. BHP spokeswoman Samantha Evans today re-iterated the company's comment on Nov. 10 that it had no plans to cut production.

``Rio seems to have changed from being on the front foot and talking about growth projects'' to pulling back on them, said Angus Aitken, director at Southern Cross Equities Ltd. ``Surely the Rio board knows merging with BHP is the best possible outcome for the longer term in this environment. You can feel the Rio Tinto board about to capitulate.''

Market Recovery

Cia. Vale do Rio Doce, the largest iron ore supplier, began output cuts last month and doesn't expect a market recovery until next year. ArcelorMittal, the world's biggest steelmaker, said earlier this month it will reduce production by as much as 35 percent in the U.S. and 30 percent in Europe after prices tumbled.

BHP may be resisting reviewing output because it's seeking competition clearance for its bid for Rio from the European Commission, the executive arm of the European Union, BT'S Barker said. ``BHP can't be proactive in making cuts in the iron ore market because the EU would view it as a negative,'' he said.

BHP has received a formal complaint on Nov. 4 from the EU outlining antitrust objections to the deal. The combination of BHP and Rio would vie with Brazil's Vale as the world's largest supplier of iron ore, the raw material used to make steel.

Swaps on London-based Rio were quoted at 690 basis points at 12:00 p.m. in Sydney, compared with 350 for BHP, ABN Amro Holding NV prices show. Both mining companies are listed in Australia and London. Rio contracts traded at about 300 basis points a month ago, according to CMA Datavision.

To contact the reporter on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net