MELBOURNE – Rio Tinto Group and its largest shareholder Aluminum Corporation of China have terminated their joint venture (JV) established to find copper deposits, as global mining companies tighten exploration budgets.
Chinalco Rio Tinto Exploration, a JV between Rio and Aluminum Corpporation, 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-team 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% of Rio, according to the producer’s annual report.
EXPLORATION PLUNGE
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% 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% 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% of Rio’s exploration budget is spent on finding copper, focused mainly on targets in nine nations, including Chile and the US, 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% to $497-million, the producer said Tuesday in its statement.