International mining giant Rio Tinto chief executive Sam Welsh (Sam Walsh) recently used the opportunity to attend the China Development Forum, meet with the media, in response to media questions, answers Sam Wales reflecting his judgment on the Chinese economy and the world economy, worth considering. The following is a Q & Record:

　　Sam Welsh: First, thank you for coming here, I am very honored to be able to come to China again, last time I came to China six weeks ago, because the Chinese market is too important for us, 40% of our revenue comes from the Chinese market. I need to come to China to visit our customers, shareholders, during my visit to China will be more understanding of China's economic and market conditions.

　　Today, the world has recognized China's economic development of the entire world economy plays an important role, but if you always observe the Chinese market in a very far away, there may be some of the more different views. I personally think that if you can personally visit this market, you will find that the market is actually run very orderly and stable. In addition, I often come to visit China, it can help us make more informed investment decisions, because we make investment decisions when they are needed first-hand market information.

　　But now I want to leave you with more time to ask questions.

　　Reporter: You just talked to Chinese visiting clients, hoping to understand the Chinese market. As China's reporters, in fact, we are also very concerned about a problem that you determine the world market, such as trends in the world market today is how look like? This year's overall situation is what? Of course, we are very concerned about your judgment on the Chinese market.

　　Sam Wells: I think the volatility of the global market is quite large, there are a variety of market forces affecting the harmonious development of the entire market. In the commodity markets, too, in recent years we can see the volatility of commodity prices is more frequent. From the global economic performance, there are some eye-catching performance of countries such as the US and Germany, but we can also see that some countries are still suffering from the negative impact of the global financial crisis brought about.

　　Back to the Chinese market, strong vision and ability to execute Chinese leadership impressed me, and they are focused in the development of economic growth. They eliminate the gap between rich and poor, urban development, improve people's living standards have very specific policies, they will become the growth point of China's economic development.

　　This morning I also heard Zhang Gaoli, deputy prime minister's speech, he mentioned in his speech, the future China will vigorously develop the innovation, improve efficiency and productivity, and enhance environmental protection, which will be the driving force for the next stage of China's economic growth.

　　To industry where my own case, the products we offer are the basic material support of economic development. As far as I know, China will continue to develop urbanization will continue to invest in infrastructure, including China advocated "along the way" initiative, as well as the construction of some new infrastructure throughout Asia, will be for our industry good news.

　　Reporter: The first is about the iron ore as iron ore prices recently has been showing a downward trend, Rio Tinto has thus been affected performance. The impact of these markets on Rio entire strategy and what impact there will be on China's investment? The second question is about nuclear issues, China is now vigorously developing nuclear power industry, if the development of nuclear power industry requires raw uranium, there is no upgrade Rio Tinto uranium production plan.

　　Sam Welsh: answer the following questions about uranium, Rio Tinto in Australia and Namibia uranium mines in Canada, there is also a potential project, but uranium mine development project would be more difficult after the Fukushima incident, we have security concern.

　　We are still in a very initial stage of drilling potential projects in Canada, whether we need to develop research. But we also believe that when the negative impact of the Fukushima incident after leveling off, demand for uranium will gradually increase. And on the other hand, nuclear power is a cleaner source of energy, so it should have a relatively good development prospects.

　　We now see it on iron ore prices falling, but this is in fact we expected. Over the past few years, market prosperity, making a lot of new capacity into the market, oversupply caused prices to fall, the market is reasonable phenomenon. All of our products have followed a strategy group that we only invest in world-class, low-cost, long-lived large-scale asset, because it can ensure that we are in the whole economic cycle cost of ownership advantage.

　　In addition, we have a high grade iron ore products. In addition to the low cost of our products, from outside the Chinese market in recent advantages and high quality of our products is also very useful for steel. High-grade ore can upgrade their steelmaking efficiency and reduce environmental pollution. We have been committed to low-cost suppliers, in addition to enhance our productivity and reduce unit costs, we achieved a lot of automation equipment items. For example, we now use automatic truck and automatic drilling machines and automatic train future can help us save costs. As to whether we want to add new production capacity, we now have three projects being evaluated or are under development. First is our first project is located in Queensland, Australia Amrun bauxite project, the reason why we move forward this project is to supply more high-quality bauxite to the Chinese market. The second is Silvergrass iron ore project in the Pilbara mines in Western Australia, the main purpose of the development of this project is to use the project to high-grade iron ore grade ore to maintain quality of the final mix, without increasing the total amount of iron ore, actually, this is more suitable for the Chinese market and make investment decisions. Another project is in Mongolia's Oyu Tolgoi (Oyu Tolgoi) project of underground copper mine, which is soon to project our board discussions. This expansion is mainly mine copper and gold in order to meet the needs of the Chinese market.

　　Reporter: Last year at this time we interviewed here you are saying, you said that you enjoyed the work, but also in the position that has been doing it. This year has seen a change in your job, it is your own decision? After July 1, where would you go? Does this mean that from Rio Tinto will focus on ferrous metals such as iron ore, nonferrous metal turning attention to the development of the times?

　　Sam Wells: Thank you, this is a very good question. In the past three years of my priorities is to put Rio Tinto re-shaped into strong performance and efficient company. So the focus of my work is how to increase the profitability of Rio Tinto, Rio Tinto and how to achieve more cash flow. Three years later, I can say that our performance is very good, we in the industry is the most powerful balance sheet, our debt is minimal. If current income as a criterion, our profitability is the best. Over the past three years we have laid a very solid foundation, now replaced with a new CEO is a good point in time.

　　My successor Xiajie Si (Jean-Sébastien Jacque) is a very good CEO. His work experience very rich in different product areas have work experience, also worked in many countries. He has both experience in mine operations, but also worked in strategic planning. So my personal view, I consider him as CEO is very reasonable. Our chairman is in my retirement, Xiajie Si appointed CEO in a press release which said that, we replace the CEO, but it does not mean that we will replace the company's strategy. Our strategy is very simple, is the low investment costs, long life, large-scale world-class assets. We only focus on investment opportunities in itself it is not a good project, we do not see it in the end is what kind of product or market, which, according to the project itself, we only value to judge it. Then you just might hear our expansion in several projects, in fact, involve different products, both iron ore, and bauxite, copper. In our portfolio, in fact, there are many opportunities. For example, we are now also exploring whether to Diavik in Canada (Diavik) diamond mines were expansion. In addition to titanium dioxide project in South Africa. In addition, we are also various places to do some exploration work, the discovery of good assets is one of the strengths of our entire group to settle down. I think I should have the confidence to say, we are in exploration investment budget should be inside the top of the industry.

　　In addition, we also have many opportunities in the copper plate, but we feel have more advantages in addition to the Mongolian Oyu tolgoi project just mentioned, and we are now doing research in the Arizona resolution copper project in Peru, and La Granja project. When it comes to acquisition opportunities, we are willing to buy only world-class low-cost assets, but now the market point of view it seems to be no such opportunity. But no matter what kind of opportunities, we should say that a solid foundation for the past three years, so we have the advantage to seize any good opportunities. Although I retired from Rio Tinto, but my way of life does not stop. I might post of non-executive directors in some companies, and I will be in community and charitable work will assume the role of some of the community.

　　Reporter: The first problem is that China now has a plan to lose such a plan is 150 million tons of steel production capacity. What is the impact on the iron ore industry is? The second problem is that FMG and Vale, recently signed a memorandum of understanding, plans to establish a joint venture in China, does this mean the Big Four iron ore price war is going to end up?

　　Sam Wales: indeed China's iron and steel industry overcapacity situation, but the government set a clear goal lose steel production capacity is a very important first step. China's steel production capacity is now 12 million tons, but actual production is about 800 million tons. So there was a clear surplus. But I think the key to energy production process is to ensure that those who lose must be inefficient, causing environmental pollution and backward steel production capacity, this will to solve the excess capacity have a positive effect.

　　I think this is why we want to offer customers high-quality, high-grade iron ore, because of their efficiency and environmental protection are beneficial. I think if we can lose these inefficient, environmental pollution and backward production capacity, which can only be a good thing. Rio Tinto to our own interests, those of our customers are basically steel is very efficient, has done some very advanced companies in terms of environmental protection measures, so for us, in fact, have little effect.

　　I also noticed that FMG and Vale signed a memorandum of understanding, but I also realize that this joint venture should be carried out, it is very difficult. They do so the main consideration is the FMG slightly lower grade ore, Vale of relatively high grade, if the two products mixed up, will get on average a higher grade product. In fact, it is taken for FMG is a defensive measure to protect the quality of their products. But they in fact there are many problems to be solved, such as this two mining giants to cooperate, how they antitrust review and approval by the government. Also, if you want to mix in Chinese ports were operating mines, ports if there are operational capability. In addition such a large project also needs the support of a lot of money, where to look for these funds. In fact, the joint venture the two sides no matter who is to succeed are not easy.

　　Reporter: The first problem is that China's economic growth continues to slow this year. International media have some prejudice that the entire commodity market weakness or bear market, mainly dragged down by the Chinese economy, and how do you see this problem? The second problem is the Rio this year to adjust their dividend policy is based on what considerations?

　　Sam Welsh: I believe that those who have more to write biased Western media comments, he did not realize that the Chinese economy is still in a growth economy than any other are a faster rate of growth. In China's "Thirteen Five" program which it plans to double the per capita income in five years. In fact, we also need to recognize that commodities are a cyclical industry, whether it is our company supplies iron ore, copper and other metal or just the oil and gas, and other commodities, including agricultural products, there will be cyclical fluctuations. In a period which, when the whole market is very good, people see more future market, there will be more investors into the market caused by excessive investment. In the market is caused by lack of investment downturn. Is so repeatedly, peaks and valleys of the constant changes in the law, it is very normal market behavior. So I think the current price fluctuations are mainly due to oversupply or too little impact is relatively large, while demand has been relatively stable.

　　On dividend policy, in fact, just mentioned our industry is a cyclical industry. If the dividends have been able to maintain growth levels, it is not realistic. In fact, our industry, the most important thing is to maintain a strong balance sheet. So if you want to maintain a strong balance sheet in a down market, in terms of debt or dividends, and other aspects have to be adjusted accordingly. We will have a cash flow forecast, the current market environment, if we want to maintain a progressive dividend policy dividend is not realistic that we will have negative impact on the balance sheet. Before we finished maintaining our 2015 commitment to progressive dividends, in fact, throughout the mining industry there, only a very few companies can do, but we did it. The next year, we expect the market environment will be very difficult, but we are still committed to give at least 110 cents per share dividend, the dividend payout ratio will remain at 40-60%.

　　In fact, this market also understand our approach, consider the whole market environment, we have a consensus to ensure a strong balance sheet, allowing the company to have more strength to move forward, the long-term development of the company is very important. So we planned capital expenditure of $ 4 billion this year, next year capital expenditure plan of $ 5 billion in 2018 capital expenditure is expected to $ 5.5 billion.

　　Reporter: I would like to ask the price of copper and aluminum last year, many of them in the domestic Chinese enterprises to capacity, but the price of copper and aluminum has been a significant rebound in quarter this year started, people fear will restart the new capacity. Do you think this is the wave of price rise is a blip or a trend for the better? Then there is no impact on our investment?

　　Sam Welsh: you say except copper and aluminum, in fact, we are iron ore, oil and other commodities this year have seen some rebound in price, but in fact these are very normal market volatility, market supply and demand will impact on prices. In my personal opinion, I think 2016 will be a very difficult year, but I think the commodities markets will gradually recover in 2017. Need to make this world we need to develop these metal raw materials, the development of the world's indispensable a product. Because the world economy in the future will show the trend of development, so the demand for our products is very large.

　　Reporter: I would like to ask China, as well as the entire industry needs, whether from the government policy of excess capacity outside pressure on China steel solution, forecast annual demand of at least 4% of the rate decline. In addition, like Vale has a very large iron ore project into production in 2016, which are generating a huge impact on the demand side of the market. You also mentioned in the Chinese market, Rio Tinto has a 40% share in the next three years in Rio Tinto's market share will be what kind of trend? Can you talk about your strategy in detail. Also now many large international resource companies are conducting a number of strategic transformation, Rio Tinto has considered this aspect of it?

　　Sam Wales: Actually our products, whether in the supply or demand side is very competitive. Many mining companies, whether large or small, are reducing their capital investments. On the demand of the global market, in fact, the fundamentals of demand growth is slow, although speed may be growing faster than before, but still slowly increasing. After mining in the extractive resources will be gradually reduced, so the new capacity into the market is also very necessary, this will allow the market to have a steady stream of power to run. There are a lot of Chinese steel market, in fact, in the analysis of demand when they are inside look at China's demand, but rarely see demand in the international market. In fact, our ability to export to China is very confident, especially those manufacturing products. In addition to the Chinese steel market, a good news is that with the "along the way" such a plan, in fact, "along the way" for the export of Chinese steel provides a very good opportunity for China's iron and steel can be used as "along the way" infrastructure raw materials. In fact, we also import a lot of things from China, for example, some large equipment such as ship loaders, reclaimers, etc., the total value of our purchase from China of these devices has reached 1.6 billion US dollars.

　　Our company's strategy is still the same, that is, no matter at what stage of the economic cycle, we have followed a large investment, long-life, low-cost world-class assets. When prices are low or potential acquisition prices are low, or you can purchase or self-built high-quality assets.

　　Reporter: And the next three years, China 40% share, as well as future market growth in China is what?

　　Sam Wales: My prediction is I think a share in the next three years as China's economic growth, the income side of the Rio Tinto should be growth. If you say it is not the absolute value of the growth, I was more difficult to determine, because it has an absolute value of factor price fluctuations. But if the share of our entire company's revenue, as long as China continues to develop, I was more optimistic about the Chinese market has room for further growth in the next three years.

　　Reporter: Mr. Sam just mentioned, the Pilbara is carrying out a new iron ore project. This new iron ore project in the previous What is the difference? Just mentioned in order to meet market demand in China, that is, before the new development with what is the difference? What are the considerations? Since then the situation is relatively low.

　　Sam Wales: those products are mixed with mine before we made thirteen mine in Western Australia (Pilbara) region, called the Pilbara ore mix. Pilbara ore is mixed throughout the seaborne iron ore market, the largest sales of a product. These products are the most widely used steel mill blast furnace of a product. Because if you are using a blast furnace to produce steel, you'll want the whole iron ore grade is relatively stable, and not a moment of high grade and low grade for a while, this whole steelmaking efficiency will be greatly affected. And many of our customers choose Pilbara ore is mixed because of its taste, quality has remained at a stable level. In addition to its quality is very stable, it is also a very reliable product, its supply is very secure. Because we have our own three terminals can transport these products to various markets. There are a lot of customers that we need more stable ore. Silvergrass development projects, but also hope to be able to provide customers with more time relatively stable ore (Pilbara mixed minerals), is out of this consideration. Because there are some mines taste has gradually declined, the new development will be output after Silvergrass higher grade ore, with products from other mines were mixed ore, to keep skin children Bala mixed ore grade stability.

　　We have now started operations Silvergrass, and it is the use of ore transport trucks way to that Mu Di Mine. Currently there will be a million of ore per year. In the future it will be twenty million tons of production capacity, to reach that size, we will use the belt.

　　Reporter: You will leave in July this post, I would like to ask how you evaluate this year to your own work? Then you are saying about this company Rio Tinto? If you do after consultant, you give the next CEO, what kind of advice? For example, in the next three years, Rio is the most important issue should be resolved with?

　　Sam Wales: If you look at the results we have achieved three years, you will find our company's efficiency and performance has a significant rise. Our cost in the past three years, lost a $ 6 billion. Our working capital, ie inventories fell by 40 billion dollars. Our capital expenditure compared with the peak lose 13 billion. So our main focus is on three years ago to improve efficiency and reduce capital expenditures. The result of our hard work, but also so that we now have made an industry of the strongest results of such a balance sheet, and our debt is the lowest. From last year's performance point of view, if we judge by the current earnings as a standard, then, we are also the most profitable company.

　　In the next three months, the two of us will jointly lead the company, some transition. We now have the basis for a very successful, but it is actually a very large company. Although this is a very large company, in terms of the transfer of the place has a lot to do, but it also has some standard and some staff to help us accomplish this thing.

　　Reporter: $ 3.3 billion of foreign exchange derivatives and non-cash loss, can specifically explain.

　　Sam Welsh: Every year these accounting firms are on our book value of the company will be an assessment. There are a lot of book value impairment is actually due to changes in exchange rates caused. For me, it may still be better understood, because when we do the accounting, such as Australia and Canada are in local currency to calculate book value. But at the half-year and annual reports throughout the year, we need to put these local book value is converted into dollars, so the whole process may have some non-cash losses due to changes in exchange rates caused. Another Impairment of non-cash impairment of the project on the West Mountain. On this project, we will be its book value minus the nearly 10 billion dollars. The main difficulty is that the decision to make this impairment we encountered difficulties in this infrastructure project financing. As was the case with the above, which are some of the accounting and auditing mandatory requirements, we must subtract the book value, but it does not affect the actual value of the project itself. Just those two, because the book changes caused by impairment, and the impairment of Simao infrastructure project financing difficulties caused by the book value, which is a mandatory requirement of the accounting criteria, which does not reflect the value of the project itself and the project attraction itself.