Rio Tinto’s Walsh Says Some Staff Moved From Shanghai

By Rebecca Keenan and Jason Scott

Aug. 11 (Bloomberg) -- Rio Tinto Group, the world’s third- largest mining company, said it moved some employees out of its Shanghai office after the detention of four executives for allegedly stealing state secrets.

“We are constantly moving people around and we have consolidated some activities outside of that Shanghai office,” Sam Walsh, head of London-based Rio’s iron ore unit, said today in an interview in Melbourne. Some non-Chinese workers from Shanghai moved to Singapore, he said, without saying how many.

The six-week detention of the Rio sales executives, Australian citizen Stern Hu and three Chinese nationals, for allegedly stealing state secrets has strained relations between Australia and China and raised concern the company’s $10 billion of sales to the Asian nation may be jeopardized. Australia has said the detentions may be connected to iron ore price talks.

“This is a giant game between Australia and one of its biggest trading partners,” said Peter Kenyon, professor of economic policy at Curtin University’s Graduate School of Business in Perth. “They are using lots of tactics to make the negotiations as complex as possible, and to a certain extent they are succeeding.”

Rio fell 1.1 percent to A$57.90 at the 4:10 p.m. Sydney close on the Australian stock exchange. The dual-listed company has gained 19 percent in Sydney since the employees were detained on July 5, and added 24 percent in London.

No Rio Contact

The company hasn’t had any contact with the four executives since their July 5 detention, Walsh said. Australian consular staff have made a second visit to Hu and urged China to deal with the probe “expeditiously,” Foreign Minister Stephen Smith told Australian Broadcasting Corp. radio today.

“We are very concerned about it from the basis of the welfare of our employees,” Walsh said. “We have very high expectations of ourselves. That’s why we are finding it very difficult to understand what is going on there.”

Rio is working closely with the Australian consulate over the detention of Hu, Walsh said.

China, the world’s biggest buyer of iron ore, is Australia’s second-biggest trading partner, with two-way trade valued at A$68 billion ($57 billion) in 2008. China is also Australia’s largest source of foreign investment.

Criminal Actions

Hu took actions that would also be criminal under Australian law, the Australian Broadcasting Corp. cited a Chinese vice foreign minister, Liu Jieyu, as saying Aug. 2.

Rio, the world’s second-largest exporter of iron ore, has agreed to a 33 percent discount for contract prices this year with Japanese, South Korean and Taiwanese mills and is yet to reach an agreement with Chinese buyers. Walsh would not comment on the status of talks with Chinese mills today.

“Demand is continuing to be strong and primarily that is being driven from China,” he said. “We are also seeing strengthening demand from Korea and Japan.”

Rio will produce 200 million tons of iron ore this year, he said, confirming an earlier forecast. The company’s main iron ore operations in Western Australia’s Pilbara region are running “flat out,” he said.

To contact the reporters on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net; Jason Scott in Perth at jscott14@bloomberg.net.