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Why Rio Tinto wants a bigger presence in lithium and copper.

Rio Tinto chief executive Jakob Stausholm wants to expand the company’s lithium and copper divisions at a time when investors are increasingly supportive of deals and his big mining rivals are consolidating.Fresh from reporting a $US5.75 billion ($8.9 billion) half-year profit, Mr Stausholm said Rio had reached an “inflection point” as internal growth projects such as Mongolia’s Oyu Tolgoi copper mine and Argentina’s Rincon lithium approached important delivery milestones.Rio Tinto’s profits are dominated by Australian iron ore, but CEO Jakob Stausholm wants to change this. Jamila ToderasRio’s finances are in a strong position. Its net debt-to-equity ratio is at a historically low level of 8 per cent, meaning Mr Stausholm has the firepower to follow the trend set by acquisitive peers such as Glencore, Newmont, Alcoa and BHP.Asked on Wednesday morning about the potential for acquisitions, Mr Stausholm underlined the importance of “synergies” created by the combination of adjacent assets or shared infrastructure.“We would like to strengthen our lithium business, and we also have opportunities to grow our copper business,” he said. “I couldn’t care less about what the lithium price is in the next 12 months, I’m more thinking about how will the market and demand be over the next decade or two, and lithium is necessary in almost any construct of a battery.”Related QuotesRIORio Tinto$117.480 2.46%1 year1 dayAug 23Oct 23Feb 24Jul 24100.00110.00120.00130.00140.00Updated: Aug 1, 2024 – 7.06am. Data is 20 mins delayed.View RIO related articles BHPBHP Group$42.300 1.83%Aug 23Oct 23Feb 24Jul 2439.00042.00045.00048.00051.000PLSPilbara Minerals$2.930 5.02%Aug 23Oct 23Feb 24Jul 242.4003.2004.0004.8005.600Mr Stausholm pointed to the fact that Rio was the world’s biggest or second-biggest producer in most of the commodities it mined – iron ore, aluminium, titanium slag and boron – but lacked equivalent dominance in some metals that would be pivotal to the energy transition.“We are very small in lithium, and we are a top five or top 10 producer of copper, so there are areas where we can further strengthen it,” he said.“The big challenge about M&A is you have to be sure that your synergies are bigger than the premium [paid in a takeover], otherwise it tends not to work out.”Growing copper footprintThe focus on “synergies” will do little to douse speculation that Arcadium Lithium could be a target for Rio, given the Peter Coleman-chaired company produces lithium from groundwater close to Rio’s Rincon asset in Argentina.Arcadium has one of the biggest lithium resource endowments in the industry – more than four times that of local champion Pilbara Minerals – but will need to find additional funding sources in the near future for its $US1.6 billion plan to quadruple production volumes by 2027.Mr Stausholm lived in Argentina during his time working for oil giant Shell, and said the South American nation had become a more attractive place to do business since Argentinian president Javier Milei’s government introduced tax breaks for projects exceeding $US200 million.“Rio Tinto would like to invest more in Latin America, particularly Chile and Argentina,” he said. “The economics of Rincon is much stronger after the new law has been passed through the Senate, so it is interesting.”The comments come a day after BHP announced plans to spend $3.2 billion on early-stage copper assets in Argentina. Mr Stausholm said he was very confident in long-term demand for lithium, despite prices slumping by more than 80 per cent over the past 18 months amid surging supply.Interim dividend“Short term it is unpredictable, but longer term it is quite predictable,” he said.Rio Tinto shareholders will receive the fourth-biggest interim dividend in the miner’s 151-year history, but the payout has fallen short of market expectations as the company prepares to spend on growth projects.First-half net profit rose 14 per cent to $US5.8 billion for the six months to June 30. The miner’s underlying earnings for the past six months were less than 1 per cent higher than the same time last year at $US5.75 billion.Shareholders will receive $US1.77 a share, representing a payout of $US2.9 billion.Analyst consensus as measured by Vuma had predicted underlying earnings of $US5.79 billion and a dividend of $US1.81 per share.RBC analyst Kaan Peker described the dividend as “a minor miss” but said it was in line with Rio’s policy to return 50 per cent of earnings as dividends at the half-year results.Mr Stausholm said the company was “consistently very profitable and growing”.The comments hint at the annual expenditure of $US10 billion that Rio has forecast for the coming years, including the development of a new iron ore province in Guinea’s Simandou mountains, plus the construction of a new iron ore mine in Western Australia each year for the rest of this decade.The result came despite a softening in prices for Rio’s big products. Iron ore prices received were 1.3 per cent lower than the same time last year, and aluminium prices were 4 per cent weaker.The exception was in copper, where Rio’s average received price was 6 per cent higher than at the same time last year.Rio Tinto shares were up 2.1 per cent in late afternoon trading on Wednesday at $117.08.RelatedRio Tinto puts biofuels before batteries in carbon credit pushRelatedAlbanese kills uranium mining at Jabiluka