Rio Ends Quest for China Mine Riches With Biggest HolderBy
Joint exploration venture with Chinalco has ceased operations
London-based Rio has reduced scope of global exploration
Chinalco Rio Tinto Exploration Co., a joint venture between Rio and Aluminum Corp., also known as Chinalco, was launched in 2011 to seek out deposits in China and had plans to expand its search to coal and potash.
“The joint venture exploration company has ceased operation and entered the liquidation phase,” Chinalco said in an e-mailed statement. Rio has discontinued exploration work in China, India and Mexico, the producer said Tuesday in a quarterly update on its operations. Rio didn’t immediately respond to a request for additional detail.
The venture, 51 percent-owned by the Chinese company, had concentrated on the northern Xinjiang, Inner Mongolia and Heilongjiang provinces, according to Rio filings. The JV had about 30 full-time staff, led by an executive based in Beijing, according to details on Rio’s website.
By partnering on exploration, and jointly developing the Simandou iron ore project in Guinea, Rio had sought to strengthen its ties with China, its top customer, after the London-based producer rejected state-backed Chinalco’s proposed $19.5 billion investment in 2009.
Rio in October agreed to sell its stake in the African project to Chinalco, a partner in the asset. Chinalco holds about 10 percent of Rio, according to the producer’s annual report.
Spending on exploration by miners has plunged to the lowest in a decade as the industry has focused on slashing costs and bolstering balance sheets. The combined budget in 2016 of more than 1,500 companies fell 21 percent on the previous year to about $6.9 billion, according to a report this month by S&P Global Market Intelligence. Exploration spending in China fell 27 percent to about $394 million in 2016, the report said.
“Copper deposits are becoming more difficult to find and develop,” Arnaud Soirat, the head of Rio’s copper and diamonds business, told investors last month at a London seminar. About 61 percent of Rio’s exploration budget is spent on finding copper, focused mainly on targets in nine nations, including Chile and the U.S., according to the producer.
Major copper discoveries are becoming increasingly rare as companies are forced to search deeper underground, according to Melbourne-based sector adviser MinEx Consulting. Rio has narrowed the focus of its geologists to 14 countries from 17, as it lowered its annual exploration budget last year by about 14 percent to $497 million, the producer said Tuesday in its statement.
Rio Tinto rose 0.4 percent to 3,425 pence a share at 8:25 a.m. in London, bringing its gain for the year to 8.2 percent.