Rio Tinto's Next Chief Commercial Officer Says Building Mines Is Better Than Buying: Here's How Long It Takes

Zinger Key Points
  • Rio Tinto's copper chief prioritizes organic growth over acquisitions, aiming to increase production by one million metric tons.
  • Building new mines presents cost-effective growth opportunities but faces challenges, including permitting and technological adoption barrie

While industry observers might have anticipated a wave of mergers and acquisitions, Rio Tinto‘s RIO copper chief, Bold Baatar, sees more value in building new mines from the ground up. He will inherit the commercial post in September, replacing Alf Barrios.

"For us, the focus is organic growth, supply growth and where in projects can we partner rather than necessarily acquiring an existing production," Bataar said in an interview with Bloomberg at the CRU World Copper Conference in Santiago.

Baatar noted a plan to increase copper production by a million metric tons within five years. This expansion will involve ramping up existing projects in Mongolia and Utah alongside global exploration efforts, including a joint venture with Codelco in Chile.

Citing a divergence between development costs and acquisition costs, Bataar gave a specific example—a Chilean copper mine constructed for $20,000 per metric ton of production, contrasting it with publicly traded companies commanding prices around $60,000 per ton.

Now read: Iron Ore Surge Boosts Australian Dollar As Rio Tinto Invests in Innovation

However, the path to building new mines is not without its challenges. Permitting reform is a major hurdle, as evidenced by concerns from BHP’s President for the Americas, Brandon Craig.

“In Chile it is urgent to improve the permit system to allow companies to approve large investment projects in a timely manner,” Craig said on a panel in Santiago, according to Reuters.

Chile, a major copper producer, is struggling with a permitting process that can involve up to 500 requests from various authorities. This delays investment and hinders growth in the sector.

Despite the potential benefits, building new mines is a long and arduous process. Data from Statista reveals the average timeframe from mineral discovery to production is 16.9 years. This breakdown highlights the dominance of the initial exploration and feasibility stages, which take an average of 12.5 years. Construction planning takes roughly 1.8 years, while the final stage of transitioning from construction to production takes approximately 2.6 years.

Beyond permitting, the mining industry faces several environmental and organizational barriers to adopting new technologies that could improve efficiency and sustainability.

According to the paper by researchers from Queensland University of Technology titled "Barriers and enablers of technology adoption in the mining industry," these obstacles include:

  • Inadequate engagement with external stakeholders like research institutions and suppliers.
  • Uncertainty in the ground conditions and operational outcomes (making companies hesitant to adopt new technologies).
  • The cyclical nature of the mining industry (discouraging long-term investments in innovation during downturns).
  • Geographically dispersed mining sites (hindering information sharing and collaboration).
  • The capital-intensive nature of the industry (making companies prioritize short-term returns over long-term innovation).

While building new mines offers a cost-effective path to long-term growth for Rio Tinto, the industry faces significant challenges. Technological advancements can play a crucial role in overcoming these hurdles, but successful adoption requires addressing environmental and organizational barriers and creating a culture that embraces innovation.

This process can be lengthy for large companies. However, academics provide solutions that can encourage technology adaptation. These include cultivating a learning culture, encouraging cross-disciplinary knowledge sharing, building trust and collaboration with external stakeholders, rewarding innovation, and giving employees more decision-making authority.

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Also read: Rio Tinto Appointment Ushers In Green Era For Mining Titan, With Copper At The Core

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