Rio Tinto: A Diamond Mining Giant

Rio Tinto was established in 1873, making it one of the world's oldest diamond mining and exploration companies. The same year, a consortium of jewelry investors came together and purchased a mine complex in Rio Tinto, Spain. At the time, the complex was still under the management of the Spanish government.

When Rio Tinto was established, it was purely a diamond-mining firm. But as the company’s fortunes grew, there was a need to diversify into other sectors. With time, Rio Tinto was interested in mining other minerals, such as copper, aluminum, iron ore, and uranium.

But Rio Tinto did not stop there, and besides the exploration and extraction of minerals, it began refining bauxite and iron ore. Today, Rio Tinto operates across six continents, though most of their exploration activities are concentrated in Canada and Australia. It has operational offices in strategic cities worldwide, including London, Melbourne, and New York. Like other global mining companies, Rio Tinto owns a chain of companies, either wholly or under joint partnerships.

The Rio Tinto company may have been established in 1873, but the region’s profile as a diamond center goes way back.

Documented records suggest that mining activities around the Rio Tinto region in the Spanish Andalusian province may have existed from prehistoric times. However, mining operations were not carried out in abundance there at the time, and instead, the site was used mainly to explore minerals like gold, copper, and silver. Iberians and Tartessians were the first to explore the site around 3000 BC. Later, the Phoenicians, Romans, Greeks, and Moors followed suit.

As more people expressed interest in the activity, most of the mining sites were depleted, and at one point, all mining undertakings in the region ceased. But in 1556, the mining sites were rediscovered. At the time, independent firms and individuals mainly carried out mining explorations. The Spanish government, however, took control of all mining ventures around the Rio Tinto area in 1724, soon to confront severe financial and logistical challenges in operating the mines. The best recourse for the government was to sell them off.

On 14th February 1873, the Spanish government held an auction that saw Matheson and Company purchasing the Rio Tinto mines. Matheson & Company was a syndicate comprising Matheson, Deutsche Bank, and the Clark, Punchard, and Company. Immediately after acquiring the mine, the syndicate established the Rio Tinto Company, registered on 29th March 1873. Rio Tinto’s new owners embarked on more regional explorations and continually innovated newer and better mining techniques. Their efforts, luckily, paid off.

Between 1777 and 1891, Rio Tinto was the most successful mining corporation in the world and controlled global diamond prices for years. The firm determined when to hoard their merchandise and release them to the global markets. Be that as it may, their stranglehold on the diamond industry received a massive blow in 1914, when the First World War began. When the war ended in 1918, Rio Tinto lost significant segments of their diamond market, most notable being the US market. The company’s fortunes continued to dwindle until the appointment of Auckland Geddes as the chairman in 1925.

The new manager came up with drastic marketing and organizational reforms and was keen on penetrating other global markets. During his tenure, Rio Tinto entered joint ventures with like-minded companies. One of Geddes’s most notable achievements was steering Rio Tinto into investing in copper mines in Zambia. But in 1950, Francisco Franco, the then-dictator of Spain, came up with somewhat obnoxious nationalistic ideals. One of his radical principles was prohibiting resources produced within Spain from being used outside the country. As a result, Rio Tinto divested most of their Spanish operations. The company is presently headquartered in London, UK.

Rio Tinto is a dual-listed company, listed on the Australian Securities Exchange and the London Stock Exchange under the names Rio Tinto Limited and Rio Tinto Plc, respectively. Though it is a dual-listed company, Rio Tinto’s shareholders enjoy equal ownership rights and economic interests. The company implemented this model to ensure management efficiency. Also, this ingenious arrangement cushions the firm from adverse tax implications.

The fact that Rio Tinto operates from two distinct locations presents conflicts in currency exchange. Thankfully, the company adopted one neutral currency—the US Dollar, and hence they keep all of their company accounts and pay dividends in USD.

The corporation has a consolidated management unit regardless of Rio Tinto’s dual-listings status. At the apex of the company’s managerial structure is a Board of Directors that comprises both executive and non-executive committee members. The executive committee is made up of heads of the various operational units of the company.

Rio Tinto’s business model is inclined towards giving back to society. For this purpose, the company always has a couple of ongoing community development projects. As expected, they focus on the local areas where their mines are based, such as the Pilbara towns that neighbor their Australian mines. To improve the welfare of the indigenous groups, the company undertakes a series of socially-responsible financial investments. Furthermore, where the situation calls for it, they give in-kind donations.

Rio Tinto is always happy to accept proposals from local community facilitators on the areas of development to prioritize, say, education, health, or the environment. Upon receiving the recommendations, the company embarks on a feasibility test before fully or partially supporting the project. Besides supporting local groups, Rio Tinto participates in government projects, but only those inclined towards building community capacity. The company does not engage in mainstream government services that the state traditionally funds.

Rio Tinto enjoys a history spanning over a century. Over the years, it has continued to explore some of the world’s richest diamond deposits. The company prides itself on supplying most of the world’s pink diamonds. Its success can be attributed to its innovative mining technology, progressive management ideas, and consumer-based approach to sales.