Options for the future

Rio Tinto Exploration's mandate is to increase the value of Rio Tinto by expanding the Group's resource base and cash flow potential. For a corporation of Rio Tinto's size, this would appear to be a daunting proposition, particularly at a time of very strong production growth and a high level of competition.

Exploration's strategy for success has stood the test of time and has outperformed alternative major company approaches. It has four basic elements.

First, we focus on discovering or acquiring only the largest and highest value mineral deposits that the natural world has to offer. These are resources that can be mined profitably at all parts of the price cycle and that can therefore deliver sustainable competitive advantage to the Group.

Second, we maintain a rigorous focus on target objectives by operating the majority of our exploration programmes ourselves rather than outsourcing the programmes to others. At the same time, we readily partner with smaller exploration companies to secure singular opportunities, local knowledge or unique operational skills that we do not possess in-house.

Third, Exploration operates as regionally based multi commodity teams rather than as a number of centrally located global commodity groups. This gives us local presence and a sound understanding of our operating environment. At the same time, we prioritise our programmes globally so that only the best opportunities are pursued.

And finally, we play to our competitive strengths rather than attempt to compete across the board. Reduced competitor effectiveness clearly increases our chance of success. But what are our competitive strengths?

We have world leading skills in bulk commodity, industrial mineral and diamond exploration. For example, although finding diamond deposits is one of the most challenging tasks in the industry, the Diamonds group was built through three discoveries made by Exploration, the most recent of which was the Murowa mine in Zimbabwe. The current order of magnitude study at the Bunder prospect in India may lead eventually to a fourth Exploration diamond discovery.

Our ability to operate effectively in highly prospective emerging jurisdictions affords us early mover advantage. Discoveries such as the Simandou iron ore deposit in Guinea came through just this type of frontier exploration. Our long term view allows us to advance our work within complex cultural and regulatory environments where smaller companies may not persist. And a corporate reputation built up over many decades makes us a preferred partner for host governments and local communities.

Commercial skills, coupled with a reputation for excellent project management and block cave mining expertise, have given us entry to major copper projects at Resolution in Arizona, Pebble in Alaska and most recently Oyu Tolgoi in Mongolia. Thanks to our reputation as a partner, the RioNor joint venture with Norilsk Nickel has positioned us for future discoveries in southern and eastern Russia.

Another area where we hold a major competitive advantage is in brownfield exploration. Local geological knowledge accumulated over many years of work allows us to identify new resources in exploration environments as mature as the Hamersley Basin in Western Australia. Such resources are highly valuable given their proximity to existing mines.

Exploration has an excellent track record and is credited with ten major discoveries over the past 15 years, most of which are now operating mines or projects that are undergoing evaluation within product groups. A rich portfolio of current opportunities suggests that this performance will continue.