London Calling

London Calling

11th November 2006

Obfuscation through "transparency"

Rio Tinto has replied to last week’s London Calling which criticised its decision to sell exploration data on Ecuador to the discredited Canadian junior mining company, Ascendant Copper.

Here’s what the company says:

“…Rio Tinto is not taking any interest in Ascendant projects at Junin or Chaucha. We are aware of the community issues and this agreement specifically excludes any interest in these areas.

“Rio Tinto is not taking any equity position in Ascendant and is not and will not be the holder of any options or warrants.

“Ascendant is one of the most active exploration companies in Ecuador and given that Rio Tinto Exploration currently has no intention of pursuing grass roots exploration programmes in Ecuador it has agreed to allow Ascendant to purchase our existing database in exchange for $50,000 and the right to clawback into any target they generate after they have spent $2.5m on exploration. The clawback is entirely at our option and would only be exercised if Ascendant identifies a world class opportunity.”

Well, that’s alright then. Or is it? No - definitely not.

Yes, the agreement does exclude Ascendant's "current" properties and a five mile "buffer zone" around them. In the context of the overwhelming actual and potential damage done by mining in Ecuador, that's small comfort indeed.

The key point we made earlier is that Ascendant has now bought kudos and credibility for peanuts while Rio Tinto has gained a valuable stalking horse - as in its deal last month with Toxic Bob Friedland’s Ivanhoe Mines . Why else would the boys at St James Square hand over years’ worth of exploration data for less than the price of one Toyota?

Tombstone Gulch

Rio Tinto has manoeuvred this way before in Latin America. Through its 100% owned US subsidiary, Kennecott, in the early nineties it acquired a highly-promising copper-gold prospect at Minas de Oro in Honduras. Unfortunately, the populace thought their sustainable shoe making businesses and agriculture more important than the yankee dollar, bought at the cost of possible contamination of their water supplies. Their campaign generated international media attention. and, by the mid-nineties, Kennecott was ready to pull out. - but not before trying to negotiate a deal over the Minas de Oro exploration rights with Carson Gold. (a Friedland company).

Carson then apparently got cold feet and Rio sold the Minas de Oro lease to another Canadian company, Tombstone Exploration, for C$1.15 million.

The deal included an option for Rio Tinto to buy up to two million shares in Tombstone over a period of two years - more than enough to provide the UK company with a Trojan horse back into Honduras at some future date.

So now Rio sits back from Ecuador, claims it's done a normal commercial deal, has no responsibility for what the junior company does with its data in the meantime and then, in three years time, has the option to acquire up to 70% of any "property" appropriated from the people by Ascendant.

"We are aware of the community issues" says Rio. For which read :"We are aware that there are problems if Rio Tinto gets directly involved at this point in time in Ecuador - we found that out through bitter experience ten and more years ago. So we're taking a back seat, hoping nobody will notice - at least nobody whose views count for much - and then, when the dust settles and the current ill-advised opposition to mining in Ecuador has weakened , we can re-enter the country and start mining with clean hands. Or then may be we won’t. It’s little skin off our nose”

We thought that conspiring with a thief was as culpable, under law, to carrying out the theft oneself. But then, Rio Tinto knows better about this than we do. After all, when it was in Ecuador in the early nineties it employed its own lawyer to "advise" the Ecuadorian government on what changes should be made to the minerals legislation.

All in the interests of having a level and transparent playing field, of course!

[Sources: Letter from Nick Cobban, Principal Adviser - Media Relations, Rio Tinto, London October 8 2006; Mining Journal, March 24 1995]