Rio Tinto aims to spend $7.5bn in push to halve carbon emissions by 2030
Rio Tinto’s new chief executive has set out plans to invest $7.5bn over the next nine years to halve the Anglo-Australian miner’s carbon emissions as governments and investors demand more aggressive action on climate change.
“We felt strongly that we needed to spell out what extra capital we are going to spend,” said Jakob Stausholm, speaking in London at the company’s first investor day in two years.
“When you go from fossil fuels to renewable energy you move from having big operating expenses . . . to actually having energy for free. There is just one problem in between, you need to make a lot of investments.”
The emission target is three times that of Rio’s previous commitment.
“Rio Tinto has finally joined the party with some very ambitious emissions reduction targets,” said Dan Gocher, director of climate and environment at the Australasian Centre for Corporate Responsibility.
However, shares in Rio dropped 4.5 per cent to £48.21, among the biggest fallers in the FTSE 100 on Wednesday, as investors digested the spending plans.
Rio’s flagship iron ore business in Western Australia is set to receive a large chunk of the investment, with the company planning the “rapid deployment” of 1 gigawatt of solar and wind energy in the region, in a bold move to fully electrify its mines, ports and rail system.
The other area of focus will be shifting its Australian aluminium smelters, which generate a third of its 31.5m tonnes of direct carbon emissions, to renewable energy. This will require 5GW of solar and wind power, alongside a flexible energy supply that can be used to top-up supply.
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“This investment may be necessary for Rio in light of the market’s focus on environment, social and governance [metrics], but the economic return on this investment will be poor,” said Jefferies analyst Christopher LaFemina. “Going green will be complex, expensive and earnings-dilutive.”
Stausholm, formerly Rio’s finance director, took the helm in January, replacing Jean-Sébastien Jacques who stepped down following an investor backlash over the destruction of ancient Aboriginal rock shelters in Western Australia to make way for a mine expansion.
His first 10 months in the job have been mixed. While surging prices for steelmaking commodity iron ore helped Rio deliver record half-year profits and a huge $9.1bn dividend, it has been dogged by operational setbacks.
Last week, the company lowered guidance for its iron ore business, and for several other divisions and also revealed another delay at its most important growth project, a huge underground copper mine in Mongolia’s Gobi desert. Meanwhile, the company has been trying to repair its relations with indigenous groups in the wake of the Juukan Gorge blasts.
Rio also said on Wednesday that it would double capital expenditure on growth projects to as much as $3bn a year starting in 2023 as its seeks to increase its exposure to copper, lithium and metals that will be needed in the energy transition.
“We really have to change the mindset,” said Stausholm. “I think as a company we had become too risk-averse.”
Asked about the resignation of Rio’s strategy director on the eve of the investor presentation, Stausholm said there had been no disagreement on Rio’s future plans.
“We are still friends and will go out bicycling together in the future,” said Stausholm.
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