Rio Tinto29 Jun 2018 08:23
Rio Tinto needs copper to reduce its reliance on iron ore
Miner ready to pay 30-40 pct premium for prime asset - source
'Future metal' copper used in electric cars, renewable energy
By Barbara Lewis and Clara Denina
LONDON, June 29 (Reuters) – Rio Tinto wants copper badly, and it's ready to pay top-dollar.
The global miner would be willing to fork out a large premium over market value to secure a prime asset as it tries to reduce its reliance on iron ore, company and banking sources told Reuters.
If it can't land a big copper project, it is weighing the cumulative power of a series of more modest acquisitions to increase its exposure to a metal expected to be in high demand from the electric vehicle and renewable energy industries, the sources said.
The approach under CEO Jean-Sebastien Jacques is a shift for
Rio Tinto , known for its cautious strategy
since it was badly burnt in the commodity price crash earlier this decade after a series of damaging acquisitions.
"The exploration space is not full of wonderful opportunities," said Kevin Fox, managing director of Rio Tinto
Ventures, a division set up to hunt for established mining projects to acquire.
"What are we looking at? It's trite to say the battery minerals sector is attracting a lot of interest and we are obviously looking at that. We include in that copper."
He declined to say how much Rio would pay or specify any projects.
More than a year after the division was set up, it has yet to make an acquisition. Banking sources say pressure is mounting for a copper deal.
One banker with knowledge of the matter said for high-quality assets, where there are large reserves of high-grade copper, Rio Tinto would be ready to pay a premium of 30-40 percent over any target's stock market value.
The banker declined to be named as the matter is confidential. Companies that hold prime copper projects can be worth anything in the region of $1 billion to $10 billion, depending on the size of their reserves, according to analysts.
Iron ore, which accounts for most of Rio's profit, has provided healthy margins for years but the outlook is uncertain as major buyer China is expected to increasingly rely on recycling rather than importing fresh ore.
Copper, by contrast, is regarded as a futureproof metal because of its widespread industrial use.
Sign In
Follow the stocks
