Rio Tinto, the world’s leading mining giant, has reported a mixed bag of results for the third quarter, with production across key commodities falling short of analyst expectations. Despite this short-term weakness, the company’s $6.7 billion acquisition of Arcadium Lithium remains a strategic move that is likely to pay dividends in the long run.
Iron ore production at Rio Tinto’s Pilbara operations in Australia saw a modest 1% increase to 84.1 million tons, driven by productivity gains that offset natural ore depletion. However, this fell short of Goldman Sachs’ projections of 86.2 million tons. The company maintained its full-year shipping guidance between 323 and 338 million tons, but warned that cash cost units could rise to the upper end of the forecast range ($21.75 to $23.50 per ton) due to inflationary pressures.
Copper production, on the other hand, experienced a slight decline of 1% to 168,000 tons during the quarter. This was primarily attributed to a highwall movement at the Kennecott mine in Utah, which limited access to the main ore face and forced the company to rely on lower-grade stockpile ore. Rio Tinto expects this disruption to impact mined copper production by approximately 50,000 tons in 2024, with potential effects lingering through 2025 and 2026. The company is addressing the challenge with a revised mine plan.
Despite the short-term challenges, Rio Tinto remains focused on organic growth. The first lithium production from the Rincon plant in Argentina is expected to commence in the coming months, marking a significant step in the company’s expansion into critical and battery metals. Additionally, the Simfer iron ore mine in Guinea is on track to begin operations next year, boasting a production capacity of 60 million tons per year, with Rio Tinto contributing 27 million tons. Meanwhile, copper production is ramping up at the Oyu Tolgoi underground mine in Mongolia, where higher copper grades are anticipated to boost output.
CEO Jakob Stausholm emphasized the company’s commitment to expanding its presence in critical and battery metals, highlighting the Arcadium Lithium acquisition as a key strategic move. “The acquisition of Arcadium Lithium brings a world-class lithium business alongside our leading aluminum and copper operations,” Stausholm said. “This is aligned with our strategy and increases our exposure to a high-growth, attractive market.”
Despite the 90% premium paid for Arcadium, the acquisition is considered a solid move, given the company’s extensive operations, asset potential, and the recent decline in lithium prices. The acquisition is expected to close in mid-2025, positioning Rio Tinto as a leading global lithium producer.
Rio Tinto’s shares were trading 0.27% lower at $66.29 in premarket trading on Wednesday.