Rio Tinto open to big copper buys but cautious of overheated market

Reuters

July 31, 2024

 

RIO TINTO may consider a large acquisition but it would have to provide value that is hard to find amid a copper market that is running hot, chief executive officer Jakob Stausholm said while discussing the company’s first-half results.

Rio Tinto derives most of its profits from iron ore but is increasingly focused on copper, where it expects growth of 3 percent a year from 2024 onward. That will come from existing projects, mainly the underground Oyu Tolgoi Mine in Mongolia, but also ventures with Codelco in Chile and First Quantum in Peru.

Speculation over large-scale mergers in the mining sector has ramped up since BHP walked away from a $49 billion plan to take over rival Anglo American in May. Anglo said the offer did not adequately value its long-term copper holdings.

Future copper demand is expected to surge to meet electrification needs as part of the transition to renewable energy sources and electric vehicles. Copper prices climbed to a record of over $11,000/t in May but have since declined.

“There’s definitely the opportunity to grow further ... We are constantly looking for other opportunities,” Stausholm said on a media call for Rio Tinto’s earnings release, referring to the outlook for its copper business.

“On the other hand, it is a bit of a heated market, so that’s not an easy market to just buy yourself into. While we are looking we are also saying, we are not prepared to pay those prices,” he said.

Analysts at Macquarie previously said they expect Rio Tinto’s copper and lithium growth to become “an emerging strategic focus” for investors.
Rio Tinto’s takeover list includes Canada’s Teck Resources, but a bid was not imminent, a source told Reuters.

“We see the Chinese economy growing plus or minus 5 percent and that is very good for commodity markets. You also see the U.S. growing. Not fantastic, but absolutely underpinning good markets and good demand for our products,” Stausholm said.

The world’s largest iron ore producer reported underlying earnings of $5.8 billion for the six months ended June 30, compared with $5.7 billion a year ago and in line with a Visible Alpha consensus of $5.8 billion.

Stausholm cited the “enormous” impact of China’s green transition on steel demand, solar cells and the expansion of wind power and electric vehicles, which he also expects to feed into higher consumption of high-grade iron ore. 

 

(Reporting by Rishav Chatterjee and Adwitiya Srivastava in Bengaluru and Melanie Burton in Melbourne; Editing by Sriraj Kalluvila, Sonali Paul and Christian Schmollinger)

 

Related article search: