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Rio Tinto (ASX, LON, NYSE: RIO) will prioritize developing new copper mines over acquiring new ones to achieve its goal of producing one million tonnes of the metal annually within the next five years, copper boss Bold Baatar has said.
Speaking at the CRU World Copper Conference in Chile, the executive noted that to boost production from the roughly 700,000 tonnes of copper it currently churns out, Rio is looking mainly at organic growth.
Most of the planned output expansion, Baatar said, will be driven by Rio Tinto’s expansion in Mongolia, Utah, and global exploration efforts, including a partnership with Chile’s owned Codelco, the world’s largest copper producer.
“For us, the focus is organic growth, supply growth and where in projects can we partner rather than necessarily acquiring an existing production,” Baatar, who was recently appointed as Rio’s next chief commercial officer, told reporters in Santiago.
Baatar said Rio would invest more in Chile if the country streamlines its permitting process, not only for new developments, but also for projects to optimize current operations.
Despite the increasing cost and time required for project development, Baatar believes that building mines is still more cost-effective than buying existing ones, a stance that may disappoint industry watchers betting on a new wave of mergers and acquisitions.
Consolidation in the industry is only logical if it increases the supply of the metal used in wiring, considering the anticipated acceleration in demand growth due to the worlds’ ongoing energy transition, Baatar noted.
“Just bringing one and one together doesn’t add more copper,” he said. “The key question is how can we bring more supply.”
The cost of building new copper mines has significantly increased over the years. In 2000, the average capital needed for a new copper mine sat between $4,000-5,000 to produce a tonne of copper. By 2012, this had risen to $10,000 per tonne, and recent analyses pegged current costs to up to $44,000 per tonne of production.
Robert Friedland, founder and chairman of Ivanhoe Mines, recently estimated the price of copper needed to reach close to $15,000 a tonne and remain there for a long period of time, before the industry can really gear up and build much needed new copper mines.
Baatar, who joined Rio in 2013 and was appointed copper chief in 2021, played a key role in leading the company to successfully complete the underground expansion of the Oyu Tolgoi copper mine in Mongolia.
He takes the post of chief commercial officer in September and industry insiders say he is likely to become Rio Tinto’s next chief executive officer.
(With files from Bloomberg)
