InterviewAmir Mirchi, Regional Vice President, MENA, Rio Tinto

“One of our main focuses right now is leveraging our sector-leading position in bauxite including in supporting the Middle Eastern aluminium sector.” Amir Mirchi, Regional Vice President, MENA, Rio Tinto

Amir Mirchi is regional head of Rio Tinto for the Middle East and North Africa (MENA) in charge of Rio Tinto’s regional business management supporting the company’s strategic initiatives, operations, investor relations and joint venture relationship management. He has several years’ experience in various aspects of business such as joint venture and alliance development, corporate strategy development, business acquisition, business realignment, major project implementation and divestiture as well as R&D management.

Mr. Mirchi discussed with AlCircle the current projects and future strategy of Rio Tinto in the Middle East Region and the growth prospect of Middle East in the aluminium sector.

Excerpts from the interview:

AlCircle: Rio Tinto’s aluminium business is taking a back seat for quite some time compared to its iron business. Do you think profit from the metal will continue to rebound in recent times?

Mr. Mirchi: We certainly have experienced several challenging years in the aluminium industry; however, there is growing optimism and positive sentiment about the prospects for the medium and long term. The fundamentals are strong and forecasters are anticipating a healthy market deficit outside China looking forward. Demand is expected to grow in the range of 7.0 to 7.5 per cent during 2015 with notable support from a growing intensity of use, particularly in the transportation sector. Aluminium prices have gradually improved over the course of 2014, and regional premiums have continued to increase at a time when the prices of other commodities have been generally falling. Against this backdrop, we have reshaped our business around our core pillars of first-quartile smelters and industry-leading bauxite position in order to deliver sector-leading performance through the cycle.

AlCircle: What are the current projects of Rio Tinto in the Middle East and North Africa?

Mr. Mirchi: The Aluminium group’s development pipeline is focused on leveraging our two sustainable competitive advantages: unrivalled positions in energy and bauxite. After successfully commissioning the first phase of our leading-edge AP60 technology in Canada, we are also focused in the near term on delivering our key brownfield projects, the modernization of the Kitimat smelter in Canada and the proposed expansion of our Weipa bauxite mine in Australia. It is important to note that we have been an active player in the Middle East for some time as equity partner in Sohar Aluminium, with our technological leadership playing a major role in positioning Rio Tinto Alcan as a supplier and partner of choice for third-party projects and joint ventures, a role that we have been proud to play.

AlCircle: Some of the biggest aluminium majors are already part of the Middle East Aluminium Industry. How will you evaluate Rio’s position in comparison to them?

Mr. Mirchi: Producers in the Middle East stand to benefit from available supply of competitively priced energy. With its smelters mostly powered by natural gas, the Middle East also enjoys a carbon-emission-intensity advantage over many other aluminium-producing regions, particularly India and China. The challenge will be skilled local talent development and continue providing energy at competitive rates.

AlCircle: In your view, what is the future prospect for the aluminium industry in the Middle East? Do you think aluminium can diversify national development beyond oil and gas?

Mr. Mirchi: The aluminium industry in the Middle East has enjoyed spectacular growth recently and I think there are still some good opportunities for the sector particularly due to available supplies of competitively priced energy. We already have seen how energy-supply and pricing issues can negatively impact aluminium output in countries that traditionally were major producers, such as Japan, US, France and Australia, whereas venues like Canada and the Middle East that offer energy advantages continue to attract investment in new and expanded capacity.

But the region should also turn its focus on the security of supply of raw materials such as bauxite and alumina as well as carbon products. Assuming that Middle East producers are successful in meeting the challenges and are able to retain their energy competitive advantage, we foresee a bright future for the region as a leader in a reinvigorated and increasingly attractive global aluminium industry. I should note as well that, in addition to cost-effective logistics and infrastructure, the Middle East offers proximity both to key European markets and emerging markets. This is an attractive, winning combination of critical success factors by any aluminium producer’s measure.

AlCircle: What is Rio Tinto’s future strategy for the Middle East and North African (MENA) region as for aluminium is concerned?

Mr. Mirchi: I would point out that we are currently engaged as both an equity partner and technology supplier to Sohar, and as the technology partner with the Saudi Arabian Mining Company for the Ma'aden smelter and with the Emirates Global Aluminium for the Shaheen alumina refinery. One of our main focuses right now; however, is leveraging our sector-leading position in bauxite including in supporting the Middle Eastern aluminium sector. The quality and scale of our resources means that we have excellent options to grow our bauxite business at the right time through projects like the South of Embley expansion of our Weipa mine in Australia. As an emerging customer, the Middle East is also expected to have an increasing demand in bauxite and we are clearly well-positioned to supply this growing need.

AlCircle: Rio Tinto has a particularly strong position in bauxite which is expected to generate EBITDA margins of more than 50 per cent in the near future. Please share with us Rio Tinto’s future strategy for bauxite.

Mr. Mirchi: Rio Tinto has the largest bauxite reserves, with interests in some of the world’s largest bauxite mines in Australia, Guinea and Brazil, and with outstanding growth options. These options include active development projects, strategically situated to supply China’s significant future bauxite import needs, as well as, the demand growth in the Middle East.

Our two Australian mines are well located for the Chinese market. Rio Tinto aluminium is already the largest player in the Chinese seaborne bauxite market. Today we export the equivalent of 20 million tonnes per year from Weipa and Gove. In the last two quarters we have supplied more than 50 per cent of the bauxite imports into China.

In bauxite our strategy is to leverage our unrivalled tier one asset position to drive value accretive growth.

AlCircle: Rio Tinto has curtailed its Gove alumina refinery operations. Is Rio Tinto looking at closing down all its alumina business and concentrating on bauxite export in the future?

Mr. Mirchi: No, we consider alumina as a key enabler for our business in our portfolio. The focus for this business will be to simply maintain a balanced position and to drive operational excellence providing competitive alumina supply security for our first quartile smelter portfolio.

Disclaimer: “The information presented herein is not intended nor implied to be a substitute for professional advice. The views and opinions shared in the interview section of www.alcircle.com are unique to the interviewees and do not necessarily reflect the viewpoint of www.alcircle.com.”

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