Rio Tinto shifts focus to copper mine development

Rio Tinto's executive, Bold Baatar, has announced a strategic shift towards prioritizing the development of copper mines rather than acquiring them outright.

Rio Tinto, will focus on developing new copper mines rather than acquiring them to reach its target of producing one million tonnes of the metal annually within the next five years, according to Bold Baatar, head of copper operations.

Addressing the CRU World Copper Conference in Chile, Baatar highlighted that Rio Tinto aims to increase production from its current output of approximately 700,000 tonnes primarily through organic growth strategies.

Baatar emphasized that the majority of the planned output expansion will stem from Rio Tinto’s developments in Mongolia, Utah, and global exploration initiatives, including a collaboration with Chile’s state-owned Codelco, the largest copper producer globally.

"Our priority lies in organic growth, augmenting our supply, and seeking collaborative opportunities in projects rather than solely pursuing acquisitions," stated Baatar, who was recently appointed as Rio's next chief commercial officer, during a press briefing in Santiago.

Baatar expressed Rio's intention to increase investments in Chile if the country simplifies its permitting procedures, not only for new projects but also for initiatives aimed at enhancing current operations.

Despite the rising expenses and time associated with project development, Baatar maintains that constructing new mines remains a more economical option than purchasing existing ones, a viewpoint that might not align with industry expectations anticipating a surge in mergers and acquisitions.

Baatar emphasized that industry consolidation would only be advantageous if it enhances the supply of copper, essential for various applications including wiring, particularly amid the anticipated acceleration in demand due to the ongoing global energy transition.

"Simply merging entities doesn't result in increased copper output," he remarked. "The pivotal issue is how to augment the supply."

The cost of constructing new copper mines has soared over the years. In 2000, the average capital required for a new copper mine ranged between $4,000-5,000 per tonne of copper produced. By 2012, this figure had surged to $10,000 per tonne, and recent analyses indicate current costs could reach up to $44,000 per tonne of production.

Robert Friedland, founder and chairman of Ivanhoe Mines, has recently suggested that the price of copper needs to approach nearly $15,000 per tonne and sustain this level for an extended period before the industry can effectively ramp up construction of much-needed new copper mines.

Baatar, who joined Rio in 2013 and assumed the role of copper chief in 2021, played a pivotal role in overseeing the successful completion of the underground expansion of the Oyu Tolgoi copper mine in Mongolia.

Assuming the position of chief commercial officer in September, industry insiders speculate that he is likely to ascend to the role of Rio Tinto's next chief executive officer.