The Rio Tinto Ltd (ASX: RIO) share price is under the spotlight following an announcement it’s going to invest US$498 million into its copper operations.
Rio Tinto is best known for being an iron ore miner, but it’s increasingly becoming a copper miner.
Strengthening copper supply in the US
Rio Tinto is investing in its copper Kennecott operations near Salt Lake City, Utah, to strengthen the supply of copper in the US by increasing production from underground mining and “improving the health of key assets.”
The ASX mining share has assigned US$498 million of funding to deliver underground development and infrastructure for an area known as the North Rim Skam (NRS). Production from the NRS will start in 2024 and is expected to ramp up over two years, to deliver around 250,000 tonnes of additional mined copper over the next 10 years, alongside open-cut operations. I think this is a useful extra boost for the Rio Tinto share price.
Rio Tinto noted that there is no certainty that further exploration work will result in the determination of ‘indicated mineral resources’ or that the production target itself will be achieved.
In September 2022, Rio Tinto approved the development of $55 million to start underground mining an area called ‘Lower Commercial Skam’ – production here will start in February 2023. This is expected to deliver a total of around 30,000 tonnes of additional mined copper through to 2027.
Rio Tinto will use battery electric vehicle technology to increase the productivity of the mine and reduce emissions from the Kennecott operations.
It’s also spending $300 million on rebuilding the Kennecott smelter, as well as $120 million on upgrading the refinery tank house structure and upgrading the molybdenum floatation with an advanced, fully automated system.
Management commentary
Rio Tinto Copper chief operating officer Clayton Walker said:
We are investing to build a world class underground mine at Kennecott and strengthen our processing facilities, to meet the growing demand for copper in the United States, a key material for domestic manufacturing and the energy transition. This investment will position Kennecott to continue the strong contribution it has made as part of the Salt Lake Valley community for 120 years, injecting about $1.5 billion annually to the local Utah economy.
Final thoughts on the Rio Tinto share price
I like the moves that Rio Tinto is making by investing more in decarbonisation commodities such as copper and lithium. The world is moving in that direction, so Rio Tinto’s earnings will become less focused on iron in time, particularly if the iron ore price never recovers to former heights. It would be helpful to be less reliant on Chinese buying of its iron.
However, I’d only think about investing in Rio Tinto shares if they dropped below a share price, because the share price is usually cyclical along with the iron ore price.
