Rio chief looks beyond mining’s ‘big is beautiful’ paradigm
Larger, riskier projects will come under more scrutiny, says Jean-Sébastien Jacques
Big will not always be beautiful in the mining industry, which will need to find new ways to grow profitably in the next decade, according to Rio Tinto’s chief executive.
Jean-Sébastien Jacques said the trend toward bigger mines would not guarantee success in the future. Instead, it would be the companies focused on improving environmental impact, partnerships and technology that would thrive in the 2020s.
“I’m not saying ‘big is beautiful’ cannot work, but it won’t be the key enabler of success in the future,” said Mr Jacques, speaking in London ahead of LME Week, the biggest annual gathering of the metals industry.
For decades, the industry has responded to growing global demand and the depletion of existing mines by developing ever-larger projects.
However, miners are facing increased pressure from investors, host governments and local communities to curb their environmental damage while delivering profits to their stakeholders. At the same time predictions that demand in China, the world’s biggest consumer of raw materials, is set to slacken has led to forecasts that demand for some metals and miners will flatline or decline.
Mr Jacques’ comments show how these concerns are shaping the thinking of leading mining companies. Rio competes with Vale as the world’s biggest producers of iron ore and is the leading supplier of aluminium and copper.
Rather than taking on “big bang” projects, miners need to consider developing small projects that could generate quicker returns for shareholders, local communities and governments, said Mr Jacques.
“They [big projects] take too long and the risk profile is too high,” he said.
One of the biggest problems miners face in developing their largest projects is the amount of time it takes to pay off construction costs, say analysts.
In the case of Rio’s troubled underground copper mine in the Gobi desert, Mongolia’s government — which is also a shareholder — will have to wait until 2030 at the earliest before it receives any dividends. This has led to calls from members of parliament to change the terms of the investment agreement that underpins the project.
Mr Jacques said Winu — Rio’s much talked about copper-gold find in Western Australia — was an example of the way the company wanted to work in the future.
While some analysts have said Winu is too small to be a Rio project, Mr Jacques said it could be a low-capital, low-risk development that could eventually support a series of mines in the surrounding area.
In that respect it would resemble Rio’s flagship iron business in Western Australia, which is essentially a group of mines sharing infrastructure, he said.
“I would rather have 10 Winu’s than one big project,” he added.
Mr Jacques said new technology could also help unlock billions of tonnes of “uneconomic” resources from mining waste, or tailings. Last week, Rio said it had found a way to produce battery grade lithium from waste rock at a site in California.
Mr Jacques said the “dream” would be finding a way to extract copper economically from tailings at its Kennecott mine in Utah. “We are working on it.”
Rio would also look to forge close links with its customers, he said.
The company recently announced plans to work with China’s Baowu Steel Group and Tsinghua University to reduce carbon emissions across the steel industry — from its iron ore mines all the way through to the end consumer