Engaging India beyond Bunder diamond project: S Vijay Iyer

Interview with Managing Director, Rio Tinto India

For Rio Tinto, not pursuing the prized Bunder diamond project in Madhya Pradesh was a difficult pill to swallow. However, S Vijay Iyer, managing director, Rio Tinto India, believes the country has more to offer. He is also upbeat on the India growth story. Edited excerpts of an interview by Jayajit Dash:

The Government of India has recently unveiled a new mineral exploration policy. What opportunities does it offer for foreign players like Rio Tinto?

There are some strong positives in the NMEP (National Mineral Exploration Policy), such as the emphasis on ensuring the baseline geo scientific data is available in the public domain, quality research in a public-private partnership, special initiatives to assist in the search for deep-seated and concealed deposits, the quick aero-geophysical survey of the country, and the creation of a dedicated geo science database. We are evaluating these and the opportunities these could create.

Will you participate in exploration and auctions of mineral blocks in India?

We understand the government’s preference towards an auction process for the allocation of natural resources that have been fully explored, evaluated and defined. However, the auction of grassroots/new exploration -- where there are no defined resources -- is without global precedent. In the current economic environment, with great volatility in international commodity markets, it is challenging to get the support of shareholders and capital providers to fund high-risk exploration business with no security of tenure, even if the cost of exploration is reimbursed on a normative basis. Mineral discoveries across the world are increasingly harder to find and when made, are often more difficult to access because they are deeper in the ground. A predictable and transparent policy system is fundamental for a strong exploration climate, to help uncover India’s full mineral potential. We are evaluating and watching the progress with keen interest.

Rio Tinto recently made an announcement around the future of its diamond project in Bunder. What prompted that decision?

As part of our ongoing efforts to drive shareholder value by conserving cash and cutting costs across our business, we have decided not to proceed with the Bunder project. Accordingly, we will be seeking to close all project infrastructure by the end of the current year. It was a difficult decision. Rio Tinto firmly believes the Bunder deposit is a high-quality discovery, and we will work with the government to explore options for a third-party investor to carry forward the project.

Our relationship with the Indian diamond industry continues to thrive, with 250,000 cutters and polishers employed in processing Rio Tinto diamonds. We remain committed to India as an important market for our metals and minerals, and as a key global hub for Rio Tinto’s shared services delivery. We expect to expand our footprint here.

What is your outlook on commodity demand and its impact on India?

Looking at the world economy, global growth remains reasonable. While there has been a pick-up in China this year there is little doubt the markets will remain challenging and volatile in the short to medium term. India is one of the fastest growing economies globally and an important market for our products. We expect that the resource intensity of India’s growth composition will increase as the country moves ahead to close the infrastructure gap and enhances the size of its manufacturing sector.

The success of such programmes as ‘Make in India’, along with the removal of bottlenecks in the infrastructure space, will be crucial elements to the sustainability of the growth prospects. These are important areas of policy and procedural transformation to promote growth and business activity.

India’s favourable demographic profile could sustain a growing middle class and drive higher urbanisation rates, both of which will be important triggers for consumption growth. The India growth story potentially benefits from both investment and consumption impulses, with the prospect to drive commodity demand across the board. We are enthused by the focus of the current government in these areas – manufacturing, infrastructure, skilling of its human capital. For a company like Rio Tinto, we build our business on the long-term fundamentals over many years, and there is little argument that the long-term demand story for our products remains strong.

Your attempt to mine iron ore in India through a joint venture with Odisha Mining Corporation has come unstuck. Are you still keen to revive the project?

It is inappropriate to comment at this stage, as this matter remains subject to legal proceedings. We continue to engage with the state government on this issue.