Discussion Paper No. 91
Rio Tinto Company’s investments
in Australia in the 1950s

Ayumu Sugawara
March 2009TOHOKU MANAGEMENT & ACCOUNTING RESEARCH GROUPGRADUATE SCHOOL OF ECONOMICS AND
MANAGEMENT TOHOKU UNIVERSITY

KAWAUCHI, AOBA-KU, SENDAI,
980-8576 JAPAN

Discussion Paper No.91

Rio Tinto Company’s investments
in Australia in the 1950s

Ayumu Sugawara†

Graduate School of Economics and Management,
Tohoku University
Kawauchi, Aoba-ku, Sendai, 980-0011
sugawara@econ.tohoku.ac.jp
Summary

The purpose of this paper is to show the process of the Australianinvestments of Rio Tinto in the 1950s. The paper mainly consists of two parts.
The first part deals with the process until obtaining a uranium mine in
March 1955 by the company. The subject of the second part is the negotiation
between Rio Tinto and the UK Atomic Energy Authority (UKAEA) on auranium sales contract signed in February 1956. The main reasons of thesuccess in the acquisition of the mine were the capability of finance andmarketing of Rio Tinto. During the negotiation with local firms for obtaining
the mine, the expected results of the sales negotiation of Rio Tinto and
UKAEA could contribute to the success of the company.


The author is very grateful to the Rio Tinto Company for permission to consult Rio
Tinto Archives and thanks are also due to the staffs of the Information Section of theCompany, especially to Ms. Emma Davies and Ms. Davina Parrott when I had occasions
to consult Rio Tinto Archives. This work was supported by Grant-in-Aid for Young
Scientists (B), 18730228, from Japan Society for the Promotion of Science (JSPS).
† Associate Professor, Graduate School of Economics and Management, Tohoku
University

Introduction
Rio Tinto Company, the subject of this paper, was established in Britain
in 1873 as a mining concern. Now the company is doing business as a dual
listed company in Britain and Australia. The purpose of this paper is to show
the process how Rio Tinto entered Australia.
Through showing the process of Rio Tinto’s investments in Australia, theauthor will try to consider the interaction between the reorganization of theexternal economic relations of Britain after World War II and the overseas
business and competitiveness of British companies. The reorganization of
British external economic relations means the shrinking of overseasinterests of Britain as a whole and the expansion of the development of
natural resources in British Commonwealth countries.
On the history of Rio Tinto, there are two books which deal with thewhole history of the company from its establishment to 1954 1 . One is
C.Harvey, The Rio Tinto Company, 1981, and another is D.Avery, Not on the
Queen Victoria’s Birthday, 1974. A.D.Chandler, Scale and Scope, 19902, andG.Jones, The Evolution of International Business, 1995 3 , deal with thehistory of competition in mining industry as well as other major industries.
On more narrowly focused topic, there is a paper, A.Sugawara, ‘Rio Tinto
Company’s investments in Canada in the 1950s’, Japanese Business History
Review, Vol.42, No.2, 2007 (written in Japanese).
The structure of the paper is as follows; the first section, Rio Tinto
Company in the 1950s, describes the performance of the company duringthat period and the company’s investments in uranium mining in Canada
and Australia. The second section, Obtaining of mining area in Australia,
deals with the obtaining of the Mary Kathleen Mine by Rio Tinto from 1954
to 1956. The third section, Uranium Selling Contract with the UK
government, shows the contents of the contract between Rio Tinto and the
UK government in February 1956. In conclusion, we will compare thefeatures of Rio Tinto’s Australian investments with those of its Canadianinvestments and we will show points emerging after the study of this paper.
1954 was a turning point for Rio Tinto because the company sold the Rio
Tinto Mine in the year as we will see later.
2 Chandler also limited the analysis in the book until about 1950.
3 Jones gave the concise explanation on the history of Rio Tinto after 1954 as
well as mining industry as a whole.
11

I. Rio Tinto Company in the 1950s
Figure 1 shows profits of Rio Tinto in the 1950s. As is shown in the
figure, the operating profit was in a deficit during 1954 to 1956. The reason
for this deficit was the sale of the Rio Tito Mine in Spain in 1954. The Rio
Tinto Mine was the birth place of the business of Rio Tinto Company. The
Mine was sold to the Syndicate of Spanish concerns for ₤11 million in which₤7.7 million was cash. After the sales, Rio Tinto Company held only a third of
the shares in the Mine4.
Compared to the operating profit, investment income increased from 1951
to 1956. The reason for the increase of investment income from 1951 to 1953
was the increase in income from investments in Rhodesia. The reason for theincrease from 1954 to 1956 was the investment income from the Rio Tinto
Mine. The increase after 1959 was came from the addition of investment
incomes from Canada and Australia5.
For Rio Tinto, the 1950s was the time of the sale of the Rio Tinto Mine
which was the birth place of the company and the only operation place forthe company before 1954. However, that decade for the company was also thetime of the geographical diversification of its mining business started. Val
Duncan, the managing director at that time, looked back to the 1950s in theannual report of 1960 and said that after the sale of the Spanish mine ‘thequestion arose as to whether we could profitably employ the active
knowledge which had been a tradition for so many years in the Mines in
Spain in the development of natural resources elsewhere in the world.’ Hecontinued ‘Great opportunities to play our part in active mining, notably in
the British Commonwealth, were presenting themselves at this period andwe decided to follow these opportunities through the medium of subsidiarycompanies formed both in the United Kingdom and overseas.’ 6 As asummary, he said ‘the diversification has been both geographical andOn the sale of the Rio Tinto Mine, Hervry, The Rio Tinto Company,
pp.302-305.
5 On the trends of investment incomes, the author estimated by using thedata on investments by area and investment incomes in each year’s annual
reports.
6 Managing Director’s Review of Operations: the Decade in Retrospect’, Rio
Tinto, Annual Report, 1960, p.9.
42

functional. We now have interests in a range of minerals…’7 Figure 2 (Maps)
shows the geographical diversification of Rio Tinto.
As is shown in the statement of the managing director, the geographicaldiversification of the company in the 1950s was accompanied by thediversification of the type of minerals which the company dealt with. Figures
3 and 4 show the types of mineral assets which the company held. Figure 3
shows the change in the types of mineral assets from 1950 to 1961. Figure 4
shows the detailed data on the types of minerals in 1961. Figures 5 and 6
show the profits generated by each mineral. Figure 5 show the change in
profits of each mineral and Figure 6 show the detailed data of the profits in
1961.
Table 1 shows the result of the mineral type diversification in the 1950s.
As a result of the mineral type diversification, uranium emerged as animportant mineral added to copper which had been the most importantcommodity during the company’s earlier history. In the mineral asset types,
copper had been the largest and uranium followed it until 1960, but uranium
took the place of copper in 1961. In the profits of minerals, copper had been
the largest until 1960 and copper and uranium had same weight in 1961.
Table 2 shows the contributions of Canadian uranium production andAustralian uranium production to the whole profit of the company. In bothyear of the table, 1958 and 1961, Canadian uranium production generated
around 30% of the company profit. The profit of Australian uranium
production was smaller than that of Canada, but the profit grew rapidly andincreased from 9.2% in 1958 to 15.3% in 1961.
Looking at the result of the diversification of geography and mineral
types from the view point of the contribution to the company profit, thecopper production in Rhodesia and South Africa may be the largest
contributor, followed by the uranium production in Canada as the second
largest, then by the uranium production in Australia as the third largest.
However, the company annual reports did not show the detailed data on thebusiness in Rhodesia and South Africa.

‘Managing Director’s Review of Operations: the Decade in Retrospect’, Rio
Tinto, Annual Report, 1960, p.10.
73

II. Obtaining of mining area in Australia(1) Rio Tinto Company’s entry into Australia
In December 1953, Rio Tinto stared explorations in Australia. The
purpose of the explorations was the development of uranium. Before starting
the explorations, Rio Tinto tried to confirm the demand for uranium by the
British government and asked for the support of the government in the
explorations and developments of uranium in Australia8.
The places under explorations by Rio Tinto in 1954 were the following;
Myponga (South Australia), Rum Jungle (Northern Territory), Pine Creek(Northern Territory), Sleisbeck (Northern Territory), South Alligator River(Northern Territory), and Mary Kathleen (Queensland). Figure 7 (Map)shows uranium mines in Australia.
In Australia, Rio Tinto employed a local mining engineer who was aretired member of the Australian Bureau of Resources9, and collaborated
with a local company10. The way which Rio Tinto operated in Australia wasdifferent from the way in Canada. After acquiring the majority interests in aSouth African exploration company 11 , Rio Tinto asked the company toperform explorations in Canada. Rio Tinto did not have local partner because
it entirely depended on the South African Company in its Canadian
Discussion on 21st December, 1953 with Represenattives of the Rio Tinto
Company, Note by Sir Edwin Plowden, the National Archives of the UK,
AB16/1284.
9 In a letter, Duncan said ‘we have secured the services of Matheson, a firstclass Australian geologist who has hitherto been in charge of the uranium
exploration for the Australian Government.’ Val Duncan to Sir Edwin
Plowden, 24 March, 1954, the National Archives of the UK, AB16/1284.
R.S.Matheson was a staff of Australian Bureau of Mineral Resources before
employed by Rio Tinto. C.B.Champell, ‘Preliminary Report on Uranium
Deposits in Northern Territory, Australia’, p.3, the National Archives of the
UK, AB16/1284. Matheson was the Exploration Manager in Australia in Rio
Tinto. Matheson to The Secretary of Rio Tinto Company, 27 July 1954, Rio
Tinto Company Archives, RTC 120-B-45.
10 Duncan said that Western Mining Corporation of Melbourne had
undertaken as Secretaries and Accountants for Rio Tinto’s organization inAustralia. Val Duncan to Sir Edwin Plowden, 24 March, 1954, the National
Archives of the UK, AB16/1284.
11 This was Weiss Geophysical Corporation heded by Oscar Weiss who wasan expert mining engineer in Southern Africa. Sugawara, ‘Rio Tinto
Company’s investmensts in Canada in the 1950s’, pp.9-10.
84explorations.
(2) Rio Tinto’s search for mining areas
We see in sequence Rio Tinto’s search for uranium mining areas inAustralia in 1954. In July 1954, Rio Tinto joined the bid for The Mary
Kathleen Mine but failed12. In October, Rio Tinto could buy the majority
shares of Sleisbeck Mine from a local company13.
However, in November a company geologist reported Sleisbeck Minewould not make as much output as was expected14. Therefore, at the end of
November Rio Tinto started negotiations to obtain South Alligator River
Mine15. But Rio Tinto failed in the negotiation16. South Alligator River Minewas bought by an American company17.
In December, just after the failure to get South Alligator River Mine, Rio
Tinto started a negotiation to obtain The Mary Kathleen Mine from a local
company, Australian Oil Exploration (hereafter AOE), which was the ownerof the Mine18. In early March of 1955, after the negotiation with AOE, Rio
Tinto could obtain 51% of the shares in the Mary Kathleen Mine19.
(3) Rio Tinto Company and the British government
Before entering into Australia, Rio Tinto tried to confirm the demand for
On Joining the bid, Matheson to The Secretary of Rio Tinto Company, 27
July 1954, RTC 120-B-45. On the failure in the bid, Cable from Lindesay
Clark to Duncan, 18 August 1954, RTC 120-B-45.
13 Val Duncan to Sir Donald Parrott, 21 October 1954, the National Archivesof the UK, AB16/1284.
14 Note of Meeting on 3rd November, 1954, Rio Tinto/Sleisbeck, the National
Archives of the UK, AB16/1284.
15 Clarke to Forward, 30 November 1954, the National Archives of the UK,
AB16/1284.
16 Lee to Clarke, Immediate, 22 February 1955, the National Archives of the
UK, AB16/1284.
17 ‘Atlas Corp.-Success in “Special Situation”’, The Australian Financial
Review, 29 April 1955, the National Archives of the UK, AB16/1284.
18 R.W.Wright to L.Tlotz (Petroleum Drilling Corporation Ltd), 29 December
1954, RTC 120-B-45. Note of a Meeting with Mr.Wright of the Rio Tinto Co.
on Wednesday, January 12th, the National Archives of the UK, AB16/1284.
19 ‘An Investors’ Note- Rio Tinto Again’, Financial Review, 3 March 1955, theNational Archives of the UK, AB16/1284.
12

5

uranium by the British government and the support for development of
uranium by the government. F.Byers, a director of Rio Tinto, said in a letter
to Lord Cherwell on 10th December 1953 ‘what assistance we might expectfrom them (the British government: by the author) in developing anythingwhich we might find’ and ‘whether the UK government is anxious to secure
an independent supply of uranium.’20
After obtaining the Sleisbeck Mine in December 1954, Rio Tinto asked
the support of the British government more concretely than before. Val
Duncan, the managing director, said in a letter to Sir Donald Parrott of the
UK Atomic Energy Authority (hereafter UKAEA) on 21st October 1954 ‘inthese circumstances we felt justified in asking you in somewhat more detailwhat your attitude would be regarding loan capital than the previous moregeneral conversations…’21‘The previous conversation’ in the above letter was the meeting in
December 1953 joined by Mark Turner, Val Duncan and F.Byers from Rio
Tinto and Sir Edwin Plowden from UKAEA. In the meeting, the Rio Tinto
staffs asked ‘a substantial contribution from Government funds: in the ratio
they (Rio Tinto representatives: by the author) suggested of perhaps 75%
from the UK and 25% from Australia.’22(4) Negotiation with AOEIn December 1954, Rio Tinto started the negotiation with AOE to obtainthe Mary Kathleen Mine. The negotiator of Rio Tinto was Roy Wright, theoverseas business director. Firstly, Wright did not approach AOE directly to
but a local partner firm of AOE, Petroleum Drilling Corporation (hereafter
PDC). In the negotiation, Wright thought the finance for building a uranium
treatment plant which would require ₤A.7.5 million was an advantage of Rio
Tinto23.
Frank Byers to Lord Cherwell, 10 December 1953, the National Archivesof the UK, AB16/1284.
21 Val Duncan to Sir Donald Parrott, 21 October 1954, the National Archivesof the UK, AB16/1284.
22 Discussion on 21st December, 1953 with Representatives of the Rio Tinto
Company, Note by Sir Edwin Plowden, the National Archives of the UK,
AB16/1284.
23 R.W.Wright to L.Tlotz (Petroleum Drilling Corporation Ltd), 29 December
1954, RTC 120-B-45.
20

6

Wright said to PDC, ‘AOE are of the opinion (I gather from you) that toraise such loans in London or North America is straightforward.
I must say quite bluntly and from experience that this is nonsense.’ Then hesaid ‘If you accept these arguments would you agree to me approaching AOE,
with the proposition of Rio Tinto putting up the major finance on a loan basis
and providing the technical and commercial management and know-how.’
Wright added ‘I have one good card to play in such talks with AOE and thatis the oxide sales contract. I mentioned to you that I thought we were in abetter position to obtain a really satisfactory contract than either you or
AOE.’24
Wright succeeded in the negotiation. On 10th January 1955, theshareholders of PDC agreed with the sale of 57% of shares in a uranium
treatment subsidiary company of the Mary Kathleen Mine to Rio Tinto25.
Moreover, on 27th February 1955 AOE agreed with the sale of 51% of sharesin the Mary Kathleen Mine to Rio Tinto26.
III. The contract between Rio Tinto and the British government
Before Rio Tinto obtained the majority of shares in The Mary Kathleen,
UKAEA had already decided to purchase Australian uranium from Rio Tinto.
In a letter to UKAEA, the British Treasury said ‘we agree that having regard
to Rio Tinto’s experience and interests, their holding of the options, theirreported acceptance by the Australian Government and their possession of asatisfactory geological team, Rio Tinto should be selected as thecontractors.’27
The uranium sales contract between Rio Tinto and UKAEA was ratified
on 8th February 195628. The main contents of the contract were as follows;
the sales quantity was 4500 tons of uranium oxide. The shipment would
start from 1959. Rio Tinto had to ship more than 300 tons in 1961 and morethan 400 tons in 196229. The price was ₤ A.40 million for 4500 tons of
R.W.Wright to L.Tlotz (Petroleum Drilling Corporation Ltd), 29 December
1954, RTC 120-B-45.
25 Cable from Tlotz to Wright, 10 January 1955, RTC 120-B-45.
26 Cable from Duncan to Byers, 27 February 1955, RTC 120-B-45.
27 D.R.Sherpell (Treasury) to E.S.J.Clarke (UKAEA), 26 January 1955, theNational Archives of the UK, AB16/1284.
28 Draft Agreement dated 8 February 1956, MKU-UKAEA, RTC 120-B-19.
29 Draft Agreement dated 8 February 1956, MKU-UKAEA, RTC 120-B-19.
24

7

uranium30.
The contract also included a loan from UKAEA to the Mary Kathleen
Mine. UKAEA would make a ₤A.5 million loan for the building of a uranium
treatment plant. Rio Tinto would invest ₤A.2.25 million in the plant31. In
January 1955, UKAEA had already decided to make the loan as well as toselect Rio Tinto as a contractor. At that time, UKAEA also required Rio Tinto
to invest in uranium development facilities32. Therefore, in January 1955,
during the negotiation with AOE, Rio Tinto had secured a buyer and financeand the company could take advantage of the decision of UKAEA in thenegotiations for the Mary Kathleen Mine.
Conclusion
There are four differences between Rio Tinto’s investments in Canada
and its investments in Australia. The first point is the ways of exploration.
In Canada, Rio Tinto asked a newly acquired subsidiary to explore and inAustralia the company directly employed local mining engineers. The second
point is the relationship with local companies. In Canada, Rio Tinto did notcollaborate with local companies but in Australia the company collaborated
with a local one from the beginning of its entry into the country. The third
point is the buyers of uranium. The Canadian uranium was sold to a
Canadian company which was owned by the country’s government.
Australian uranium was sold to the British government. The reason for thedifferences was the difference in the policies of each government. The fourth
point is finance. In the Canadian uranium development, the issue of bonds
was used as the way to finance things. In Australia, the British government
made a loan for the development of uranium by Rio Tinto. The reason fordifference was also the difference in policies of each government33. However,in the Canadian development finance, the Commonwealth Development‘Uranium from Queensland’, Times, 29 December 1956, the National
Archives of the UK, AB16/1284.
31 Draft Brief for Commonwealth Relations Office, Mary Kathleen, no date,the National Archives of the UK, AB16/1284.
32 Clarke to Sherpell, 25 January 1955, the National Archives of the UK,
AB16/1284.
33 The Canadian government did not allow other governments to financeuranium development in Canada directry. Sugawara, ‘Rio Tinto Company’s
investmensts in Canada in the 1950s’, p.17.
30

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Finance Corporation in which the Bank of England partly joined underwrote
15% of the bonds.
Rio Tinto’s investments in Canada and Australia have three points incommon. All of the points were related to the obtaining of mining area. The
first point is the way of obtaining mining areas. In both Canada andAustralia, Rio Tinto obtained mining areas not through exploration ingreen-fields but through acquisition of mining areas from local firms. The
second point is the way of acquisition of mining areas. In its acquisitions ofmining areas, Rio Tinto firstly committed to finance development of themining area. The third point is also part of the way of acquisition. To secure
the right of management in a mine, Rio Tinto used the advantages intechnology and marketing to the local company34.
Finally we will try to show the points emerging after the study of thispaper. The new point which we have to deal with is the competition in eachmarket. From the view point of Rio Tinto’s business, there are three kinds ofcompetitors; local firms, American firms, and British firms. In this paper, we
showed a case of competition with a local firm in which Rio Tinto had theadvantages in finance, technology, and marketing. In competition with
American firms, there was a case in Canada in which the ill feeling of a
Canadian company to an American one in a bid for the former from the lattergave Rio Tinto the chance to acquire the former. In Australia, we saw a casein which Rio Tinto lost to an American company in a bid for a mine. To knowwhether there is competition between Rio Tinto and other British firms inAustralia is a question that remains.

In Canada, to acquire the majorty shares in the Algom Uranium Mines
Rio Tinto take advantage of finance and technology. In Canada, Oscar Weissemphasized the layout of mine as a techonological advantage. Sugawara, ‘Rio
Tinto Company’s investmensts in Canada in the 1950s’, p.13.

34

9

Figure 1

Profits of Rio Tinto

8000
7000
6000
5000
4000
3000
2000
1000
0
-1000

1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961
Operating Profit(1)Gross Investment Income(2)Trading Profit(1)+(2)Source: Rio Tinto, Annual Reports, 1960 and 1961.

Figure 2 Rio Tinto’s geographical diversification, 1956

Source: Rio Tinto, Annual Report, 1956.

10

Figure 3 Rio Tinto’s Mineral Assets (₤ million)
60
50

Uranium(Loan)40

Uranium(Equity)

30

Oil

20

Copper
Gold

10

Other
0
1950

1955

1956

1957

1958

1959

1960

1961

Source: Rio Tinto, Annual Report, 1961.

Figure 4 Rio Tinto’s Mineral Assets, 1961 (₤ million)
Uranium 32.0％
Oil 12.5％

Gold 3.4％

Copper 27.8％
Other 24.1％

Source: Rio Tinto, Annual Report, 1961.

11

Figure 5 Rio Tinto’s Profit by Commodity (₤ million)
6

5

Uranium

4

3

Oil

2

Copper

1
Gold
Gold

0

Other
1950

1955

1956

1957

1958

1959

1960

1961

Source: Rio Tinto, Annual Report, 1961.

Figure 6 Rio Tinto’s Profit by Commodity,1961 (₤ million)
Uranium 47.5％

Gold 1.7％

Oil 3.3％

Copper 47.5％

Source: Rio Tinto, Annual Report, 1961.

12

Table 1

Result of Rio Tinto’s Overseas Investments
AssetsProfits

Uranium

CopperUranium

Copper

1959

22.0%

41.0%

41.0%

44.0%

1960

27.4%

30.7%

37.0%

53.7%

1961

32.0%

27.8%

47.5%

47.5%

Source: Rio Tinto, Annual Reports, each year.
Table 2
Year

1958

1961

Rio Tinto’s Profits from Uranium (₤ 1000)
Total Profit

3157

7150

Profits from Uranium
CanadaAustralia

910

289

1199

28.8%

9.2%

38.0%

2309

1091

3400

32.3%

15.3%

47.6%

Source: Rio Tinto, Annual Reports, 1958 and 1961.

13

Canada + Australia

Figure 7

Uranium Mines in Australia, 1982

Source: T.L.Neff, The International Uranium Market, Ballinger Publishing
Company, Cambridge, Mass.,1982, p.115.

14