The Rio Tinto Limited (ASX: RIO) share price is under the spotlight today after the miner announced that the Peru La Granja copper project is progressing.
Rio Tinto may be best known for its iron mining operations, but it’s getting increasingly involved in ‘green resources’ such as copper (and lithium).
La Granja copper project to progress
Rio Tinto and its partner First Quantum have entered into an agreement to form a joint venture that will work to develop the La Granja copper project in Peru, one of the largest undeveloped copper deposits in the world.
La Granja was described as a “complex orebody located at high altitude in Cajamara, Northern Peru, that has the potential to be a large, long-life operation, with a published Indicated and Inferred Mineral Resource totalling 4.32 billion tonnes at 0.51 percent copper”.
Rio Tinto bought the project from the Peru Government in 2006 and has been carrying out extensive drilling that significantly expanded the declared resource and understanding of the orebody.
The transaction is expected to complete by the end of the third quarter of 2023, subject to regulatory approvals.
What is the cost of this project?
Rio Tinto said that First Quantum will acquire a 55% stake in the project for $105 million, and has committed to invest up to $546 million into the joint venture to “sole fund capital and operational costs to take the project through a feasibility study and toward development.”
After the completion of the sole funding commitment, all subsequent spending will be applied between the two partners based on their ownership stakes of the project.
Final thoughts on this and the Rio Tinto share price
It’s good to see that Rio Tinto is continuing to diversify itself away from iron ore. It sounds like a tricky project, so it’s a good idea to bring a partner into the situation, and seemingly get them to do a lot of the starting work.
I wouldn’t buy Rio Tinto shares just on this news alone, but I do like that it’s working on diversifying its operations away from Australian iron ore. I think that lowers the risks and improves its long-term potential.
If the iron ore price were to fall below US$100 per tonne, I think Rio Tinto could be an interesting idea to consider.
