Discussion Paper No. 107
Entry of Rio Tinto into Iron Ore Development inWestern Australia

Ayumu Sugawara
October 2012TOHOKU MANAGEMENT & ACCOUNTING RESEARCH GROUPGRADUATE SCHOOL OF ECONOMICS AND
MANAGEMENT TOHOKU UNIVERSITY
KAWAUCHI, AOBA-KU, SENDAI,
980-8576 JAPANEntry of Rio Tinto into Iron Ore Development in Western Australia

Ayumu SUGAWARA

Graduate School of Economics and Management
Tohoku University
Sendai, Japansugawara@econ.tohoku.ac.jp

Abstract
This paper examines the historical process behind the development of iron ore in
the state of Western Australia by the British mining company Rio Tinto from 1959 to
1962. To analyze Rio Tito’s iron ore operations, the author applies Michael Porter’s ‘fiveforces’ concept. In its uranium case, Rio Tinto had strong bargaining powers in
relationships with governments as buyers, which were the reasons for its successes.
However, in the Western Australian iron ore case this factor did not influence thecompany’s competitiveness. Thus, the iron ore case demonstrates that Rio Tinto did notjust depend on its relationships with governments. On the other hand the positive
factors in Rio Tinto’s iron ore venture were its relationships with private companies asbuyers or collaborators. Both advantages flowed from Rio Tinto’s global status, but they
were not enough for its entry into iron ore development and had to be complemented by
localization in order to overcome the barrier built by the state government.

11. Introduction
This paper examines the historical process behind the development of iron ore in
the state of Western Australia by the British mining company Rio Tinto from 1959 to
1962 (Rio Tinto began exploring for iron ore in Western Australia in 1959) 1 . The
Western Australian iron ore developed by Rio Tinto was first shipped in 1966, but thispaper has set 1962 as the end of its analysis period due to document availability.
The background behind this research is the general business history of the Rio
Tinto Company and this paper serves as part of a study on Rio Tinto’s post-1954 revival
process. In 1954 Rio Tinto sold the Rio Tinto Mine in Spain, the company’s original
location, to a Spanish bank consortium backed by the Spanish government. The deal
was motivated by the pressure caused by the Spanish government’s decades-long wish
to nationalize the copper mine.
In the first half of the 1950s, Rio Tinto began searching for new mines, mainly in
the British Commonwealth. Developing iron ore in Western Australia was one of Rio
Tinto’s new Commonwealth ventures. The venture succeeded, and Rio Tinto became oneof the big three global suppliers of iron ore, along with CVRD (Companhia Vale do Rio
Doce) of Brazil and BHP Billiton of Australia and Britain2.
In regard to previous works we already have two voluminous works on the historyof the Rio Tinto Group prior to 1954—the first by Avery (1974) and the second by
Harvey (1981). Avery’s work is a more general history whereas Harvey’s work is basedon the framework of the business history research conducted by Chandler (1962, 1977).
In Chandler (1990), Chandler himself compared Rio Tinto to American copper mining
and smelting companies between 1890 and 1940. Chandler (1990) said that Rio Tinto
lagged behind its American competitors because it had not made large investments inthe smelting sector3. This author is exploring the business history of the Rio Tinto
Group after 1954 in order to fill the gap in the Group’s history between 1954 and now.
Rio Tinto changed its name in 1962 as Rio Tinto-Zinc (RTZ) as a consequence of themerger with Consolidated Zinc. However in this paper we call the company as Rio Tinto
even after 1962. Rio Tinto-Zinc re-changed its name as RTZ-CRA in 1995 and thenreturned to its original name, Rio Tinto, in 1997, Harvey et al (2009).
2 On the recent situation of the global iron ore industry, Singh and Hoyt (2007).
3 Chandler (1990) especially pp.280-281 and 285-286.
12

Jones (1996, 2005) dealt with Rio Tinto as a case in his general explanation on theinternational mining industry between the late nineteenth century and the earlytwenty-first century. This paper bases its research on Jones’ (1996, 2005) and considers
it an overview of the history of Rio Tinto since 1954.
With regard to Rio Tinto after 1954, Sugawara (2007) and Sugawara (2009)
conducted research on the uranium business in Canada and in Australia in the 1950s,
respectively. The entry into the uranium business in the two countries was the first stepin the revival of the Group, followed by developments in the copper and iron ore
industry in South Africa and Australia, respectively.
Raggatt (1968) and Black and Sone (2009) provided the base for this paper by
explaining the developments in the iron ore industry in Western Australia as a whole.
Focusing on the developments in the iron ore industry in Western Australia brought
about by Rio Tinto, which led to the opening of Hamersley Iron Pty. Ltd., Trengave(1976) is an early intensive work on the history of Hamersley Iron and Hamersley Iron
Pty. Ltd. (1981) provided practical information on their operations.
Finally, Boyce’s (2001) research is closest to this paper’s with regard to the subject
and the research method—using archival material 4 . Boyce (2001) focused on therelationship between detailed business negotiations and the transaction cost theory.
Empirically, Boyce (2001) emphasizes on the bargaining power of Japanese steel mills
and general trading companies. This paper, however, focuses on the entry of Rio Tinto
into Western Australia, the relationship between Rio Tinto and the state government,
and Rio Tinto’s competitiveness.
This paper has two objectives—to describe the history of Rio Tinto’s entry into theiron ore mining business and to analyse the reproduced entry process from theperspective of mining firms’ competitiveness.
Rio Tinto’s revival began in the 1950s with its uranium development businesses in
Canada (in 1953)5 and Australia (in 1954)6. In order to compare the iron ore case with

However, the documents Boyce (2001) consulted are currently unavailable.
Sugawara (2007).
6 Sugawara (2009).
4
5

3

the uranium case we summarize Sugawara (2007) and Sugawara (2009). The buyers of
Rio Tinto’s uranium were a Canadian government corporation and the British
government, respectively. Thus, Rio Tinto’s relationship with governments was a main
factor in the success of its uranium development. The suppliers of Rio Tinto’s uranium
mines were smaller explorers in Canada and Australia. Rio Tinto’s stronger marketingand financing capabilities gave it a large advantage when negotiating to acquireuranium mines. In other words, not only in its relationships with buyers but also in its
relationship with mine suppliers, Rio Tinto’s relationship with governments brought
advantages. There were two reasons for this. First, Rio Tinto’s relationship withgovernments allowed it to secure uranium buyers before negotiations with mine
suppliers began. Second, the relationship helped Rio Tinto raise funds to develop its
uranium mines. In the Canadian case, the Commonwealth Development Company, inwhich the Bank of England had invested, accepted some of Rio Tinto’s newly issued
bonds; in Australia, the UK Atomic Energy Authority lent Rio Tinto money. Thus, thecompany’s relationship with governments can be identified as a main factor in the
success of Rio Tinto’s uranium business. However, we must ask whether we cangeneralize the conclusion, deduced from Rio Tinto’s uranium case, that its competitive
advantages came from its good relationship with governments, especially in the
Commonwealth.
To consider this question through an analysis of Rio Tito’s iron ore operations, theauthor applies Michael Porter’s ‘five forces’ concept because Porter’s notion clarifies theimpact of firms’ relative bargaining power on their competitiveness7. Among the five
relationships in the five forces concept, the author focuses on three: a firm’s
relationships with its buyers, suppliers, and competitors. In Rio Tinto’s uranium case,in the company’s relationships with buyers (governments) and suppliers (smaller local
firms), Rio Tinto had strong bargaining powers, which were the reasons for its successes.
We wonder, then, whether the same conditions obtained in other natural resource areas.
The structure of this paper is as follows. In section two we describe the entry
process of Rio Tinto into iron ore development in Western Australia chronologically and
7Porter(1980), especially chapter 1.
4

in detail. Then in section three we consider bargaining powers of Rio Tinto and Western
Australian government and the competitiveness of Rio Tinto in comparison with thecase of uranium business. The final section concludes this paper.

2. The Entry Process

2.1. BackgroundIn the middle of the 1950s, Japan’s demand for iron ore increased as it began its
historically high rate of growth. Japan had lost its traditional iron ore supplier, China,
through the consequences of WWII and the beginning of the Cold War8. Thus, Japanese
steel makers and trading houses sought new iron ore suppliers9. On the other hand
Australia banned iron ore exports in 1938 (the ban continued into the 1950s) 10 ;Australia began trying to curb Japan’s military production in the same year while
seeking to promote its domestic steel production11. However, Australia was expected tolift its ban on iron ore exports in the late 1950s12.
Table 1 shows the chronology of Rio Tinto’s entry into the iron ore business inWestern Australia. Before its entry, Rio Tinto had no iron ore production capacity.

[Table 1]

The success and development of the iron ore industry in Western Australia has
been very beneficial to all three stakeholders, Rio Tinto, Japanese and Australianindustries. First, after 1966, iron ore became the second most important product for Rio
Tinto, following copper in sales and profits (Figures 1 and 2). Hamersley Iron, the centreof iron ore development for the Rio Tinto Group, became the largest iron ore producer in

Kosai(1986)p.82.
Tanaka(2008)pp.176-177.
10 Raggatt(1968)pp.106-109.
11 David and Sone(2009)chapter 6.
12 Raggatt(1968)pp.109-110.
895

Western Australia13. This was mainly because of the sales to Japan (Figure 3). Second,
the increase in iron and steel production in Japan was supplemented by the iron ore
supply from Western Australia (Figure 4 and Table 2)14. Third, iron ore emerged as amajor export commodity for not only Western Australia but also the Australian economy
as a whole (Figures 5 and 6). The iron ore trade increased and strengthened theeconomic relationship between Australia and Japan (Tables 2 and 3). However, for Rio
Tinto to enter the iron ore industry was never easy.

2.2 Collaboration with Western Mining
By May 1959, Rio Tinto had begun iron ore exploration in Western Australia15. Just
after starting, Rio Tinto attempted to collaborate with the Western Mining Corporationof Australia16. Both companies had already collaborated when Rio Tinto entered into
Australian uranium development in the middle of the 1950s 17 . However, thecollaboration promptly began to dissolve by the end of November 1959, chiefly becauseof Western Mining’s temporary financial problems but also because Rio Tinto’s basic
strategy was to diversify its mining products by increasing the number of mines under
its own operation18.

2.3 Approach by Japanese trading houses
In late November of 1959, a Japanese trading house, Mitsubishi Corporation,
Among four largest iron ore producers (Hamersley, Mt. Newman, Robe River, Mt.
Goldsworthy), Hamersley was the second largest following Mt. Newman in 1970 to 1973
and the largest in 1974 to 1977, Matsushima (1980) p.246. Mt. Newman project was led
by BHP (Australia) and Amax (USA), Raggatt (1968) p.125.
14 The three largest iron ore suppliers to Japan were Australia, Brazil and India. For
example, in 1975 Australia supplied 63 million wet metric tons to Japan followed by
Brazil’s 23 million tons and India’s 16 million tons, Tanaka (2012) p.38.
15 R.S.Matheson (Exploration Manager, Rio Tinto) to H.Jensen (Exploration Manager,
Rio Tinto), 5 May 1959, Rio Tinto Archives (hereafter, RTA), RTC-211-120-C-41-1.
16 Lindesay Clarke (Western Mining) to Val Duncan (Managing Director, Rio Tinto), 3
June 1959, RTA, RTC-211-120-C-41-1.
17 Sugawara(2009).
18 Pat Robinson (Rio Tinto, Australia), Note on conversations with Mr. Lindsey Clarke,
26 November, 1959, RTA, RTC-211-120-C-41-1. Val Duncan (Managing Director, Rio
Tinto) to Pat Robinson (Rio Tinto, Australia), 25 September 1959, RTA,
RTC-211-120-C-41-1.
13

6

approached Rio Tinto’s Melbourne office to suggest collaborating in Western Australia.
Rio Tinto responded that they did not need investments in their iron ore venture fromJapanese firms and that other Japanese trading houses had already approached them19.
In June 1960, Mitsubishi visited Rio Tinto Melbourne again and Rio Tinto repeatedly
told them that other Japanese trading houses had already approached the mining
company. Rio Tinto also said that they would choose a Japanese trading house as abusiness partner for their iron ore exports to Japan when exporting from Australia
became possible20.

2.4 Tender for Goldsworthy
In December 1960, Australia’s Minister of Economic Development lifted thenation’s embargo on iron ore exports, whereupon Rio Tinto attempted to select aJapanese trading house as an iron ore business partner 21 . Rio Tinto nominatedMarubeni Co. because the Japanese house had, in January 1961, offered to bear half ofthe Mt. Goldsworthy (Map 1) exploration expenditure22. Rio Tinto’s local Australianstaff had a high opinion of Marubeni because a Marubeni employee from Japan incharge of its Australian iron ore business had seemed far more acquainted with thebusiness than were other Japanese trading houses23.
In March 1961, the Western Australian Minister for Mines informed Rio Tinto thatthe tender for Mt. Goldsworthy would be held shortly. At that time, Rio Tinto requested
longer term mining rights for extra royalties without tender, but the Western

A.E.Buxton (Rio Tinto, Australia) to P.M.Robinson (Rio Tinto, Australia), 1 December
1959, RTA, Bow-113-269.
20 A.E.Buxton (Rio Tinto, Australia) to G.Okada (Mitsubishi, Australia), 22 June 1960,
RTA, Bow-113-269.
21 A.E.Buxton (Rio Tinto, Australia), Comments on the Australian Government’s
decision to lift the embargo on the export of iron ore, 15 December 1960, RTA,
Bow-113-269.
22 R.H.Harding (Rio Tinto, Australia) to the Secretary (Rio Tinto, London), 17 January
1961, RTA, Bow-113-269. R.H.Harding (Rio Tinto, Australia) to the Secretary (Rio Tinto,
London), 25 January 1961, RTA, Bow-113-269.
23 R.H.Harding (Rio Tinto, Australia) to A.E.Buxton (Rio Tinto, Australia), 25 January
1961, RTA, Bow-113-269.
197

Australian government refused24.
Rio Tinto had hoped that the state government would support infrastructure
construction such as railroads and ports, but understood it would not; research on thecosts of railroad and port construction showed that it would be too expensive25. Due tothese high infrastructure costs, Rio Tinto did not join the Goldsworthy tender26. A
consortium consisting of Consolidated Goldfields of Australia (a subsidiary of South
Africa’s Consolidated Goldfields), Cyprus (USA), and Utah Construction (USA) bid
successfully27.

2.5 The discovery of the Pilbara (Hamersley) deposits
The cost of infrastructure was not the only reason Rio Tinto decided not to join theGoldsworthy tender. Rio Tinto had another, positive reason: the discovery of more
attractive deposits in Pilbara (Map 1). In early March of 1961, Rio Tinto Australia madea short internal report stating that the estimated amount of iron ore in Pilbara was 500
million tons28. In late March, Rio Tinto’s London head office was also attracted by the
Pilbara deposits29. However, Rio Tinto was uncertain about developing new mines in
Pilbara because they did not know how the Western Australian government would
assign the exploration rights30.

Brief Memorandum of Discussion between the Hon. A.F.Griffith-Minister for Minesin Western Australia-and Mr.A.H.Telfer-Under Secretary for Mines, Messers
L.G.Hancock and E.A.Wright, 1 March 1961, RTA, Bow-113-269.
25 Jewell (Rio Tinto, London) to Byers (Rio Tinto, London), 15 March 1961, RTA,
Bow-113-269. Hohnen to Duncan (Managing Director, Rio Tinto), 15 March 1961, RTA,
Bow-113-269. Frank Byers to John Hohnen, 21 March 1961, RTA, Bow-113-269. Hohnen
to Duncan, 28 March 1961, RTA, Bow-113-269.
26 John H. Hohnen (Rio Tinto, Australia) to the Secretary (Rio Tinto, London), 1 June
1961, RTA, RTC-211-120-C-41-1.
27 Financial Times, 22 December 1964. Raggatt (1968) p.121.
28 Hohnen (Rio Tinto, Australia) to Duncan (Managing Director, Rio Tinto), 1 March
1961, RTA, Bow-113-269. Byers (Rio Tinto, London) to Hohnen, 21 March 1961, RTA,
Bow-113-269.
29 Hohnen (Rio Tinto, Australia) to Duncan (Managing Director, Rio Tinto) 24 March
1961, RTA, Bow-113-269.
30 R.W.Wright (Rio Tinto, London) to John Hohnen(Rio Tinto, Australia), 21 April 1961,
RTA, Bow-113-269.
248

2.6 Temporary reserve rights on Hamersley
In May 1961, Rio Tinto, with Hancock and Wright (a local prospector), applied for
temporary reserve rights (a two-year right to exclusive exploration) on the Pilbara
deposits to the state government. In July, Rio Tinto and Hancock and Wright werepermitted temporary reserve rights on ten deposits of the thirteen to which they had
applied31. At that time, the mining concerns that had secured sufficiently large lands
were BHP (Australia), with 750 m2, Rio Tinto (Britain), with 688 m2, and Consolidated
Goldfields (Australia), with 481 m2 32.

2.7 Seeking mining rights to Hamersley
In December 1961, Rio Tinto sought the mining rights to Hamersley by presenting
a concrete proposal to develop the area to the Western Australian government. However,
the government again refused 33 . The Premier of Western Australia regarded the
proposed royalty as too low and the proposed quantity of iron ore to be secured by Rio
Tinto as too large. During negotiations, both sides manoeuvred for dominance. A state
representative implied that offers to develop the Hamersley deposits had been made byother mining concerns; Rio Tinto replied that, if a deal were not reached quickly, itsJapanese steel mills would secure its iron ore supply from another country, such as
Brazil 34 . Finally, the government proposed a royalty of six shillings per ton andpermission for Rio Tinto to secure 200 million tons of the area’s ore for export. Rio Tinto
accepted these conditions in January 1962 35.
Rio Tinto Australia to Rio Tinto London, 20 July 1961, RTA, RTC-211-120-C-41-1.
T.D. to Byers (Rio Tinto, London), 28 July 1961, RTA, RTC-211-120-C-41-1. H.E.Jensen(Exploration Manager, Rio Tinto) to Jocelyn (the Secretary, Rio Tinto, London), 7 August
1961, RTA, RTC-211-120-C-41-1. R.F. Lethbridge (Rio Tinto, London) to R.W.Wright(Rio Tinto, London), 9 August 1961, RTA, Bow-115-268.
32 R.F. Lethbridge (Rio Tinto, London) to R.W.Wright (Rio Tinto, London), 9 August
1961, RTA, Bow-115-268.
33 Rio Tinto to Arthur Griffith (Minister for Mine, Western Australia), 5 December 1961,
RTA, Bow-115-268.
34 John Hohnen (Rio Tinto, Australia) to J.M.Rodd, 29 December 1961, RTA,
Bow-115-268.
35 John Radd to Duncan (Managing Director, Rio Tinto), 3 January 1961, RTA,
Bow-115-268. John Hohnen (Rio Tinto, Australia) to A.Griffith (Minister for Mine,
Western Australia), 16 January 1962, RTA, Bow-115-268.
31

9

Despite Rio Tinto’s compromise, negotiations were suspended36. In May 1962, Val
Duncan, managing director of Rio Tinto London, said ‘the business became a total
mess’37. The suspension occurred because the state government had given priority toanother iron ore development project, Goldsworthy (whose participants included a localfirm), and had decided not to provide support to any other projects38.

2.8 Mining rights entitlement for Hamersley
Rio Tinto was given mining rights to the Hamersley deposits by the Western
Australian government in July 1963 39. During the negotiations, Rio Tinto had been
disadvantaged relative to local firms. In order to overcome this, Rio Tinto did two things.
It merged with Consolidated Zinc Corporation, established in 1949 through a merger
between a British manufacturing firm, the Imperial Smelting Corporation, and an
Australian mining firm, the Zinc Corporation, and regarded as a local mining firm.
After the merger, Consolidated Zinc managers did most of the negotiating with thegovernment, improving relations between the government and the newly merged
company40.
Rio Tinto’s second tactic was collaborating with the American Kaiser Steel in July

John Hohnen (Rio Tinto, Australia) to David Brand (the Premier, Western Australia),
2 March 1962, RTA, Bow-115-268. Hadden F. King (Director in Charge of Exploration,
Consolidated Zinc) to M. Mawby (Chairman, Consolidated Zinc, Australia), 19 March
1962, RTA, RTC-211-120-C-41-1.
37 Duncan (Managing Director, Rio Tinto) to Alfred Bear (Chairman, Consolidated Zinc,
London), 1 May 1962, RTA, Bow-133-281F.
38 Hadden F. King to M. Mawby (Conzinc Riotinto of Australia), 29 November 1962,
RTA, Bow-133-281F. Mawby to Duncan (Managing Director, Rio Tinto Zinc), 29
November 1962, RTA, Bow-133-281F.
39 M.Mawby (Chairman, Conzinc Riotinto of Australia) to Crawford D. Nalder (Acting
Premier, Western Australia), 30 July 1963, State Record Office of Western Australia,
ITEM1963-0222V1.
40 M.Mawby (Chairman, Consolidated Zinc, Australia) to C.W.M.Court (Minister ofIndustrial Development, Western Australia), 6 March 1962, RTA, Bow-115-268. Hadden
F. King (Director in Charge of Exploration, Consolidated Zinc) to M. Mawby (Chairman,
Consolidated Zinc, Australia), 19 March 1962, RTA, RTC-211-120-C-41-1. The Premierof Western Australia to M.Mawby (Chairman, Consolidated Zinc, Australia), 20 March
1962, RTA, RTC-211-120-C-41-2. Blake Pelly (Rio Tinto, Australia) to Tom Price (Kaiser
Steel), Draft, 26 April 1962, RTA, Bow-115-268.
36

10

196241. They invited Kaiser into their iron ore business to show their intention toestablish a steel mill and contribute to the industrialization of Western Australia42. The
state government expected that a local steel mill would process the iron ore mined there
on a long-term basis, and Rio Tinto tried to appeal to the government’s expectations43.
The collaboration with Kaiser Steel was treated favourably by the local mass media44.
Rio Tinto’s collaboration with Kaiser Steel was also driven partly by its merger with
Consolidated Zinc, as the latter company had a business relationship with Kaiser
Industries, the parent of Kaiser Steel and Kaiser Aluminium with which Consolidated
Zinc had run a joint Australian venture, Comalco, in bauxite mining and aluminium
refining45. In the end, however, Rio Tinto had waited two years to receive the mining
rights to the Hamersley deposits after obtaining temporary reserve rights, whose fullterm of two years was expiring.

3. Discussion: the bargaining power of Rio Tinto

3.1 Rio Tinto’s counterparts in the iron ore caseIn the case of the Western Australian iron ore development, the buyers wereJapanese steel mills and general trading houses; the land supplier was the Western
Australian government, and the competitors were local firms, such as Western Mining,
Consolidated Goldfields, and BHP and American firms such as Cyprus, Utah
Construction, and Kaiser. Competitors could also be collaborators, as with Western
Mining and Kaiser.

Memorandum of Agreement between Kaiser Steel Corporation (“Kaiser Steel”) and
the Rio Tinto Mining Company of Australia, which is changing its name to Conzinc
Riotinto of Australia (“CRA”), 11 July 1962, RTA, RTC-211-120-C-41-2.
42 Rio Tinto to Arthur Griffith (Minister for Mines, Western Australia), 5 December
1961, RTA, Bow-115-268. Hohnen (Rio Tinto, Australia) to Val Duncan (Managing
Director, Rio Tinto), 11 January 1962, RTA, Bow-115-268.
43 The Premier of Western Australia to M.Mawby (Chairman, Consolidated Zinc,
Australia), 20 March 1962, RTA, RTC-211-120-C-41-2.
44 Daily News, Perth, 9 March 1962. The West Australian, 12 March 1962.
45 Raggatt(1968)p.78. Trengove(1976)p.33. Boyce(2001)p.549.
41

11

3.2 The case of uranium in Canada and Australia
When Rio Tinto entered into uranium development in the mid-1950s, the buyers
were a state-owned company (in Canada) and the British government (in Australia); theland suppliers were smaller local firms, and the competitors were local and American
firms. In the case of uranium development, favourable relationships with government
buyers had a strong impact on not only the marketing of uranium ore but also thenegotiations with land suppliers during the acquisition of the mines amidst competition
from other firms. Moreover, good relationships with the British government were
beneficial to financing.

3.3 The mining rights issue: the bargaining power of the WA government
When entering the iron ore business in Western Australia, Rio Tinto had to wait
two years, until July 1963, to receive mining rights, having been granted temporary
reserve rights in July 1961. Its uranium business exemplified Rio Tinto’s strong
bargaining powers in the British Commonwealth, but the iron ore case revealed that,even in Commonwealth countries, Rio Tinto did not always have those powers,
especially when dealing with governments. It is striking how, in a region rich in natural
resources, the Western Australian government had a strong bargaining power whengranting mining rights. Behind this strong bargaining power was the industrialorganization of the state’s iron ore mining; the industry had many entrants. This
market situation allowed the state government to give priority to local firms and takeadvantage of foreign firms for the sake of economic development. The state
government’s position was similar to that enjoyed by natural resource countries in later
years.
Encountering the state government’s strong bargaining power, Rio Tinto had nochoice but to follow its policy, especially on mining rights. In this restricted situation,
Rio Tinto had to localize itself by merging with Consolidated Zinc and insisting oncontributing to the industrialization of the local economy by establishing a steel
processing sector with Kaiser Steel (though the steel mill was never constructed).

12

4. Conclusion
In the uranium case, favourable relationships with governments, especially in
British Commonwealth countries, were the prime factor in Rio Tinto’s competitiveness.
In the Western Australian iron ore case, however, this factor did not influence thecompany’s competitiveness. Thus, the iron ore case demonstrates that Rio Tinto did notjust depend on its relationships with governments when entering new fields.
The positive factors in Rio Tinto’s iron ore venture were its relationships withJapanese trading houses as buyers and its relationships with collaborators such as
Consolidated Zinc and Kaiser Steel, which contributed to its successful development ofiron ore in Western Australia. The relationship with Kaiser facilitated a financial
arrangement with an American bank syndicate led by the Bank of America in 196546 as
well as displayed Rio Tinto’s intention to establish a steel mill. The relationship withbuyers enhanced its marketing capability, and its financial arrangement with Americanbanks indicated its fund-raising capability. Both capabilities flowed from Rio Tinto’s
status as a global mining company based in London, the commercial and financial
centre of the global economy47.
However, these capabilities, based on Rio Tinto’s global status, were not enough for
its entry into iron ore development in Western Australia and had to be complemented by
localization in order to overcome the barrier built by the state government. The merger
with Consolidated Zinc filled the final gap between the global and the local.

Trengove(1976)p.78. Hamersley Iron Pty. Ltd., Re: Proposed Bank Financing, 25
January 1965, State Record Office of Western Australia, ITEM1965-0099.
47 On the commercial aspect of the City of London, Michie(1992), especially chapter 2.
46

13

References
Avery, David (1974) Not on Queen Victoria’s Birthday: the Story of the Rio Tinto Mines,
Collins
Black, David and Sachiko Sone (2009) An Enduring Friendship: Japan and Western

Australia: Past, Present and Future, Westerly Centre
Boyce, Gordon (2001) “Multilateral Contracting in Australian Mining: the Developmentof Hamersley Iron, 1961-1966”, Enterprise & Society, Vol.2, Issue 3
Chandler, Alfred D. (1962) Strategy and Structure: Chapters in the History of theIndustrial Enterprise, M.I.T. Press
Chandler, Alfred D. (1977) The Visible Hand: the Managerial Revolution in American

Business, Harvard University Press
Chandler, Alfred D. (1990) Scale and Scope: the Dynamics of Industrial Capitalism,
Harvard University Press
Crawford, Sir John and Sabro Okita eds. (1976) Australia, Japan and Western Pacific

Economic Relations, Australian Government Publishing Service
Hamersley Iron Pty. Ltd.(1981) Hamersley Iron: Resource, Technology, Operation:

Dampier, Mount Tom Price, Paraburdoo, Hamersley Iron
Harvey, Charles E. (1981)The Rio Tinto Company: an Economic History of a Leading

International Mining Concern, 1873-1954, Allison Hodge
Harvey, Charles E., Dorothy Kroll, Stacee Sledge and Christina M. Stansell (2009) “RioTinto PLC”, in Tina Grant ed., International Directory of Company Histories,
Vol.120, St. James Press
Jones, Geoffrey (1996) The Evolution of International Business: an Introduction,
Routledge
Jones, Geoffrey (2005) Multinationals and Global Capitalism: from the Nineteenth to

the Twenty-First Century, Oxford University Press
Kosai, Yutaka (translated by J. Kaminski) (1986) The Era of High-Speed Growth: Noteon the Postwar Japanese Economy, University of Tokyo Press
Matsushima, Masahiro (1980) “Australia: Nichi-Gou Boueki to Koubutsu Shigen
Kaihatsu [Australia: Trade with Japan and Mineral Development]”, in Kazuo
14

Shibagaki ed., Sekai No Naka No Nihon Shihonsyughi [Japanese Capitalism in theWorld], Toyo Keizai Shinpo Sha
Michie, Ranald C. (1992) The City of London: Continuity and Change, 1850-1990,
Macmillan Press
Mitchell, Braian R. (1998) International Historical Statistics: Africa, Asia & Oceania

1750-1993, 3rd Edition, Macmillan Reference Ltd
Porter, Michael E. (1980) Competitive Strategy: Techniques for Analyzing Industries

and Competitors, Free Press
Raggatt, H.G. (1968) Mountains of Ore, Lansdowne Press
Singh, Samir and David Hoyt (2007) “Rio Tinto Iron Ore: Challenges of Globalization in
the Mining Industry”, Case: GS-56, Stanford Graduate School of Business
Sugawara, Ayumu (2007) “Rio Tinto Sha No Tai Canada Toushi, 1952-1956: Kougyou
Takokuseki Kigyou No Keisei Katei [Rio Tinto Company’s Investments in Canada
in the 1950s: Making of a Mining Multinational]”, Japan Business History Review,
Vol.42, No.3
Sugawara, Ayumu (2009) “Rio Tinto Company’s Investments in Australia in the 1950s”,
Discussion Paper No.91, Tohoku Management & Accounting Research Group
Tanaka, Akira (2008) “Why Sogo Shosha Needed?: Japan’s Develop-and-Import Schemeof Iron Ore in the 1960s”, Oikonomika, Vol.44, No.3 & 4
Tanaka, Akira (2012) Sengo Nihon No Shigen Business: Genryo Chotatsu System To

Sogo Shosha No Hikaku Keieishi [Japan’s Natural Resource Business: aComparative Business History on Natural Resource Procurement and General
Trading Company], Nagoya Daigaku Syupan Kai
Trengave, Alan (1976) Adventure in Iron: Hamersley’s First Decade, Stockwell Press

15

Map 1 Pilbara Region and Hamersley
Pilbara Region
Dampier

Source: Boyce (2001)* The author replaced Dampier with King Bay inthe original map.

16

Table 1 The Process of Rio Tinto’s Entry into the Iron Ore Business in Western
Australia
The first half of 1959: Rio Tinto began exploration in Western Australia (hereafter ‘WA’)in collaboration with the Western Mining Corporation, Australia (hereafter ‘WM’).
The second half of 1959: Collaboration with WM was dissolved.
1960: RT continued exploration, mainly on Mt. Goldsworthy.
Dec. 1960: Australian government lifted its ban on iron ore exports.
The first half of 1961: RT changed its exploration target from Goldsworthy to
Hamersley.
The second half of 1961: RT sought mining rights from WA government.
Feb. 1962: RT merged with Consolidated Zinc (Australia/Britain, hereafter ‘CZ’).
The first half of 1962: RT negotiated its royalty with the WA government. RT invited
Kaiser Steel (America) to become its steel-making partner.
The second half of 1962: RT examined how to market iron ore to Japan.
July 1963: RT was given mining rights for Hamersley by the WA government.
Jan. 1964: RT chose Dampier as its port for iron ore exports.
Dec. 1964: RT contracted iron ore sales with Japanese steel mills.
Jan. 1965: RT had a loan facilitated by a syndicate of American banks.
Aug. 1966: RT shipped its first iron ore from Hamersley to Japan.

17

Figure 1 Sales of Rio Tinto by Products (Sterling Pounds Million)

Source: Rio Tinto’s Annual Reports* The left axis shows the sales of copper and gold and iron ore. The right axis
shows the total sales.

Figure 2 Profits of Rio Tinto by Products (Sterling Pounds Million)

Source: Rio Tinto’s Annual Reports* The left axis shows the profits of copper and gold and iron ore. The right axis
shows the total profits.

18

Figure 3 Iron Ore Shipments of Hamersley Iron Pty. Ltd.
(Thousand Wet Metric Tons)

Source: Hamersley Iron Pty. Ltd. (1981)

19

Figure 4 Japan’s Iron and Steel Productions (Thousand Metric Tons)

Source: Mitchell (1998)

Figure 5 Australia’s Iron Ore Output (Thousand Metric Tons)

Source: Mitchell (1998)

20

Figure 6 Australia’s Major Export Commodities (US Dollar Million)

Source: Crawford and Okita (1976)

21

Table 2 Japan’s Iron Ore Imports (US Dollar Million)
Y1965
Total Value

Y1966

Y1967

Y1968

Y1969

523.7

606.7

713.3

830.4

967.2

Value from Australia

2.8

24.8

97.8

164.0

273.7

Per cent from Australia

0.5%

4.1%

13.7%

19.8%

28.3%

Y1970

Y1971

Y1972

Y1973

Y1974

Total Value

1207.21330.1

1274.01653.62073.8

Value from Australia

421.9

515.8

537.8

776.4

973.4

Per cent from Australia

35.0%

38.8%

42.2%

47.0%

46.9%

Source: Crawford and Okita (1976)

Table 3 Australia’s Iron Ore Exports (US Dollar Million)
Y1965

Y1966

Y1967

Y1968

Y1969

Total Value

3.03

51.53

115.43201.06311.15

Value to Japan

2.94

47.88

100.58174.54274.04Per cent to Japan

97.1%

92.9%

87.1%

86.8%

88.1%

Y1970

Y1971

Y1972

Y1973

Y1974

Total Value

419.17438.94539.26706.611016.39

Value to Japan

368.8

381.39471.64606.42781.7

Per cent to Japan

88.0%

86.9%

87.5%

85.8%

76.9%

Source: Crawford and Okita (1976)22