Rio Tinto in the Ascendant

Published by MAC on 2006-11-05

Rio Tinto in the Ascendant

by London Calling

5th November 2006

Only two weeks after Rio Tinto - that conscience-driven icon of corporate social responsibility - invested in notorious Robert "Toxic Bob" Friedland's Ivanhoe Mines (see MAC last week), it's done a deal with a hardly-less censorable company, Ascendant Copper, in Ecuador.

According to the junior Canadian, the agreement, signed on October 30th, is an "alliance" [sic] for minerals exploration in Ecuador.

First, a little bit of history

During the early 1990s the UK-Australian company was exposed by Accion Ecologica in Quito and a delightfully-named British group, "Parrots in Peril " (mostly students from Imperial College, London, ironically itself sponsored by Rio Tinto) - as exploring within the Podocarpus National Park in the southern part of the country.

When this evidence was presented to the Rio Tinto board at the 1993 shareholders meeting, the company claimed not to be aware it was trespassing on a protected area ("bosque") - in any case it was "against company policy" to do so.

When conclusive evidence was presented that this was precisely what the company was doing, Rio Tinto withdrew from Podocarpus (in the meantime having itself sponsored a small scale miners' cooperative operating within the park boundaries).

Soon afterwards it sacked its general manager in Ecuador and in 1997 announced that it had sold up all its exploration leases in the country which, at the time, out-matched all mineral licences granted to other companies.

During the time it was in Ecuador, according to Ascendant, Rio Tinto "developed an extensive exploration data package, reportedly investing over US$14million, focusing on both copper and gold primarily on the western slope of the Andes in the Cordillera Occidental and generating exploration data extending from Ecuador's northern border with Colombia to its southern border with Peru"

Under the terms of the new agreement, "Ascendant will have exclusive use of this data package for a period of five years" Although the Canadian company is paying an initial payment to Rio Tinto of only US$50,000, it's nonetheless committed to spending at least US$2.5 million in the areas already identified by Rio Tinto.

And then ? Well here’s the catcher in the rye for Rio: "At any time up to 60 days after the third anniversary of the effective date of the Agreement, assuming Ascendant has fulfilled its obligations, Rio Tinto has the right to earn a 60% interest in any Target Property" and "an additional 10% (up to 70%) by completing a Final Feasibility Study on the property.”

Earlier last month we found Robert Friedland, with a copper glint in his beady eyes, start running all the way to the bank with the potential US$1.7 billion of Rio Tinto shareholders' funds that the London mob has, under certain conditions, pledged to Ivanhoe.

Now, Ascendant has been given a similar, if more modest, fillip - and bags more credibility - by gaining the confidence of the world's second most powerful mining company.

No wonder Gary E. Davis, President and CEO of Ascendant, is slapping Rio Tinto on the back as having done "an excellent job" in its previous exploration, assays and drilling -adding: "[T]his marks a significant step in the advancement of the Company in Ecuador. “

Davis gushes on, with the boyish delight of a fourth-grader who's just had a kiss from his favourite teacher. He says the collaboration gives Ascendant "the pre-eminent position and distinct competitive advantage in the country regarding mineral exploration as no other company, large or small, has committed anywhere near the time and effort to exploration in Ecuador as has Rio Tinto."

Snake in the grass

To Rio Tinto, of course, it's all par for the course. It bought into Freeport McMoran Copper and Gold in 1995, hoping to disguise its crucial role in turning the Grasberg mine into the most destructive in the world. It’s riding on the back of Ivanhoe into Mongolia, expecting no one (except those fanatics from Partizans) will bother that it’s also throwing money at the military regime

Now it's engaged with the disreputable Ascendan, hoping nobody will notice since it hasn't - as yet -actually sealed the knot.

You have to admire the acumen of those strategists at number 6 St James Square.

Of course to them this is all "normal business."

But to the man in the London street, farmers in Ecuador striving to preserve their livelihoods, and the beleaguered activists from Intag, it might smack more of chicanery - impure and far from simple.

[Sources: Statement from Ascendant Copper, Lakewood, Colorado, October 30 2006; archives held by Partizans, London 1992-1995]