The Oyu Tolgoi copper mine in Mongolia
Rio Tinto Group’s copper head says he sees much more value in building mines rather than buying existing assets – comments that may disappoint industry observers anticipating another spate of mining dealmaking.
The world’s second-largest mining company is looking to reach copper production of one-million metric tons within five years, up from about 700 000 t. The increase would come as Rio Tinto ramps up in Mongolia, expands in Utah and engages in exploration around the world, including a venture in Chile with Codelco.
“For us, the focus is organic growth, supply growth and where in projects can we partner rather than necessarily acquire an existing production,” veteran executive Bold Baatar said last month on the sidelines of the CRU World Copper Conference in Santiago.
Even though projects are becoming more expensive and time consuming to develop, they are still cheaper than making acquisitions, said Baatar, who was recently named as Rio’s next chief commercial officer. He gave the example of a Chile copper mine built for $20 000 per metric ton of production versus some public companies that trade around $60 000 a ton.
Industry consolidation only makes sense if it expands supply of the metal, given expectations that the energy transition will accelerate demand growth in the coming years.