Rio Tinto, a leading mining group, is targeting copper as the demand for the metal is expected to double by 2035. With an electric car requiring almost three times more copper than a traditional combustion engine vehicle, Rio Tinto sees an opportunity in becoming a major player in the copper market. However, experts predict that demand for copper will outstrip supply as early as 2026, prompting Rio Tinto to reconsider its long-term strategy.
To meet the growing demand, Rio Tinto is considering increased spending on exploration and processing of copper. The company is also developing new technology to extract copper from previously unmined sources. Other mining groups, such as BHP, Glencore, and Newmont, are also exploring options to expand their copper production.
Rio Tinto is well-positioned to expand its operations in the copper market. It forecasts meeting a quarter of the global demand growth for copper in the next five years through its mines in Chile, the US, Australia, Peru, and Mongolia. Its Kennecott copper mine in Utah and its stake in the world’s largest copper mine, Escondida in Chile, contribute significantly to its copper production.
As Rio Tinto expands its copper production, it aims to compensate for potentially lower earnings from its iron ore division. Analysts predict a decline in iron ore prices in the coming years. By 2027, Rio Tinto’s earnings from copper could reach $6bn, compared to $2bn this year. In contrast, earnings from iron ore are expected to fall from $16bn to $11bn during the same period.
However, Rio Tinto faces challenges in the copper industry, including the failure to proceed with the Resolution copper mine in Arizona and fewer mining projects reaching the final investment decision. Risks such as new governments, tax changes, and permit uncertainties also impact mining companies’ ability to develop new copper projects.
Bold Baatar, the head of Rio Tinto’s copper business, acknowledges the increasing costs of mining deeper for higher-grade copper. The company also explores new processes, such as block caving and hydrometallurgy, to improve resource output and recovery rates.
While mergers and acquisitions are common strategies for growth in the mining industry, Rio Tinto’s chair, Dominic Barton, believes more creative thinking and increased exploration spending are necessary to bridge the gap between demand and supply in the copper market. He also suggests collaboration with smaller companies for early-stage exploration and extraction.
Addressing challenges posed by governments in developing countries, such as the requirement to build processing facilities at mining sites, remains a concern for Rio Tinto. The company will prioritize profitable solutions that satisfy government and societal expectations.
In summary, Rio Tinto aims to become a major player in the growing copper market driven by the demand for electric vehicles and cleaner energy. With investments in exploration, technology, and partnerships, the company seeks to meet the increasing global demand for copper while addressing industry challenges.
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