Rio Tinto saddles up feng shui

Rio Tintos jade horse stands at 1.2 metres, is cut from gemstone and has a prime view of Shanghai from the companys office on the 40th floor of the Wheelock Square building.

After weathering the collapse of a $19.5 billion (R173.7bn at Friday’s rate) deal in 2009 and the arrest of four executives, Rio Tinto did what you do in China to court better fortune: it bought a jade horse.

Standing at 1.2m, the statue cut from the ornamental stone has a prime view of Shanghai from the company’s office on the 40th floor of the Wheelock Square building. It is meant to help avoid any repeat of the rocky relationship the world’s second-biggest mining company has had with China, its largest customer and shareholder.

“When we designed this office, we asked a feng shui master to give us some guidance” and he said it was very important to have a jade horse in a pool of water, London-based Rio Tinto’s China managing director Ian Bauert, said.

“So the good qì comes in, the good spirit comes in to recirculate and makes us a prosperous and happy company in China.”

While Rio Tinto has lost market share to arch-rival BHP Billiton in China since the trouble welled up in 2009, it nevertheless increased Chinese sales 72 percent to $19.5bn in the three years to June 30. BHP Billiton boosted Chinese sales 119 percent to $21.6bn in the period.

Since the fallout from 2009, the company had “improved its position substantially”, said Tim Schroeders of Pengana Capital. He credited Rio Tinto’s efforts without commenting on any potential luck from the horse, built from white jade.

Rio Tinto, the second-biggest iron ore exporter, competes with BHP Billiton and Brazil’s Vale to feed China’s $82bn-a-year appetite for the steel-making material. With stakes that high, any help Rio Tinto can get to maintain smooth relations with China’s government is welcome, after the jailing of company executive Stern Hu two years ago and the collapse of a $19.5bn investment deal in 2009.

“Competition for Chinese market share is getting more fierce,” said Xu Xiangchun, the chief analyst with researcher Mysteel.com. “Having a good relationship with the Chinese government and steel makers is critical for the miners.”

The arc in Rio Tinto’s fortunes in China dates to 1973, when it says it became the first foreign company to supply iron ore to the Asian nation. Since then Rio Tinto has shipped more than 1 billion tons there. China generated sales of about $20bn in calendar year 2011, or 33 percent of Rio Tinto’s total, and almost double that of North America, its second-largest market. Rio Tinto doesn’t break out earnings from China.

Rio Tinto, BHP Billiton and Vale are jostling for an edge in supplying China with key commodities such as iron ore, copper and aluminium. By 2030, China will need to build 50 000 skyscrapers – equal to 10 New York cities – and there will be 221 cities with populations of more than 1 million, compared with 35 in Europe today, according to estimates from the McKinsey Global Institute.

The running jade horse, designed by Beijing-based Taiwanese artist Huang Zhiyang, is 1.6m long and 0.35m wide. It has a steel frame set with jade pieces and stands in a pool of water. In China, water is a symbol of wealth and when spoken the word has a similar sound to “cai”, a word for money or wealth.

“A horse can reflect the owner’s wish to have swift changes, or to enhance business quickly,” Hong Chen, a feng shui master, who did not participate in the consultation for Rio Tinto, said. “Jade is valuable and noble.”

Feng shui is a traditional Chinese method of arranging the human and social world in auspicious alignment with the forces of the cosmos, including qì and yin-yang, according to the Britannica Concise Encyclopedia. It was devised during the Han dynasty (206BCE to 220CE) and involves diviners using compass-like instruments to determine the cosmic forces affecting a site. On the feng shui master’s advice, the horse was placed in water on the opposite side of the building overlooking the Jingan Temple, Bauert said. “He said it was very important.”

The earth-red water feature also reflects the origins of Rio Tinto back in 1873. That was when British and European investors bought the ancient mines beside the Rio Tinto, or Red River, in southern Spain, Adam Robarts, the co-founder of Beijing-based Robarts Interiors and Architecture, said. Robarts was commissioned to design the offices and his clients include Deutsche Bank, the Carlyle Group and Toyota.

The statue with its exposed steel created “a contemporary sculpture whilst still evoking the historic Han dynasty running horse that was its inspiration”, Robarts said.

Rio Tinto, which has been doing business with China for more than 50 years, ran into deeper water when Hu and three colleagues were arrested in July 2009, a month after the then debt-laden company rejected a $19.5bn investment from its biggest shareholder, Aluminium Corporation of China, or Chinalco.

The arrests raised tensions between Australia and China and prompted chief executive Tom Albanese in August 2009 to concede that Rio Tinto faced a “number of challenges in China”.

Hu, an Australian citizen, was sentenced in March 2010 by a court in Shanghai to 10 years in jail after being found guilty of taking bribes from steel mills and infringing commercial secrets.

Rio Tinto’s position was far better than it was after the Chinalco deal’s failure, said Schroeders. It had made “substantial efforts to build up goodwill to make sure they have a package of ongoing business with Chinese because it’s very important”, he said.

Chinalco’s publicly traded unit agreed in July 2010 to pay $1.35bn for a stake in Rio Tinto’s Simandou iron ore project in Guinea, making its first investment in the commodity. Rio Tinto and Chinalco also formed a venture in China last year to look for copper, coal and potash deposits, aiming “to be a strategic partner to China in the supply, development and also the discovery of those resources”, Albanese said.

“We want Rio Tinto to be a reliable and valued contributor to China’s long-term development,” Bauert said. “We expect to spend $1.5bn this year buying Chinese goods and equipment for our mining operations and we have joint ventures in Australian and Guinean iron ore and Chinese exploration with Chinese partners.”

In January last year Rio Tinto opened a Chinese-language website, which shows a list of its global news and its deals with China, introduces its products, and links to a statement that says employees should not be involved in bribery. Vale also runs a Chinese website, while BHP Billiton does not have one.

It isn’t just Rio Tinto that has looked to incorporate feng shui into its offices. Geomancers in feng shui have been consulted on the design of buildings and offices globally.

“Consulting feng shui is increasingly being adopted by overseas companies doing business in China,” Hong Chen said. – Helen Yuan from Bloomberg