MINEX Forum

Tag: investment strategy

  • Rio Tinto Scales Back Lithium Expansion, Prioritises Capital Discipline and Existing Projects

    Rio Tinto Scales Back Lithium Expansion, Prioritises Capital Discipline and Existing Projects

    Rio Tinto has pared back its ambitions for rapid lithium growth, telling investors at its capital markets day in London that it will limit investment to projects already under development, with any further expansion contingent on market conditions and strict returns criteria.

    CEO Simon Trott confirmed that the company will complete its current slate of lithium projects — including the Rincon brine operation in Argentina and a single spodumene mine in Canada — to reach approximately 200,000 tonnes per year of lithium capacity by 2028. This figure is below the miner’s earlier guidance of 225,000 t/y, marking a recalibration of expectations amid a volatile market.

    Trott emphasised that Rio Tinto remains bullish on long-term lithium demand, particularly from grid-scale energy storage, but said capital discipline would take precedence over aggressive growth. The company is prioritising delivery of its major ongoing developments, including the Oyu Tolgoi underground expansion in Mongolia and the Simandou iron-ore megaproject in Guinea. Group capital expenditure is expected to fall below $10 billion from 2028.

    Rio Tinto has already halted spending at the Jadar lithium project in Serbia, which has been placed into care and maintenance after regulatory setbacks. The company is also reassessing its next steps in Canada, where the Whabouchi and Galaxy deposits are under review. Energy chief Jérôme Pécresse said both projects will remain active at minimal cost while Rio evaluates which — if either — will proceed. “It’s a reasonable decision to open one mine, not two, but too early to say which one,” he said.

    Trott reiterated that any new lithium investment would move forward only when market fundamentals justify it and when projects meet Rio Tinto’s financial thresholds. The miner has allocated roughly $3 billion per year for growth across the portfolio but will not deploy capital that cannot “move the needle” in terms of shareholder value.

    “We have a clear path to 200,000 tonnes by 2028 and that will be a fantastic business for us,” Trott said. “On other projects, we’ll continue to assess them based on the market fundamentals as they come up to sanction.”

    He added that Rio Tinto still possesses “the best undeveloped lithium assets in the business,” but emphasised that growth for its own sake is off the table. Maintaining a strong balance sheet is the priority, with cost savings from asset reviews and infrastructure optimisation expected to bolster shareholder returns.

  • “Samruk-Kazyna” Reports Record Revenue Amid Shifts in Investment Strategy

    “Samruk-Kazyna” Reports Record Revenue Amid Shifts in Investment Strategy

    The National Welfare Fund “Samruk-Kazyna” achieved a record revenue of 15.4 trillion tenge in 2023, despite moving further from its ideal model as an investment holding. This shift is driven by the government’s efforts to maximize returns from the Fund as both a policy tool and a profitable asset. According to the latest audited financial report, Samruk-Kazyna continued to grow its assets, reaching 36.9 trillion tenge, a 10% increase year-on-year. This growth was fueled by significant investments in fixed assets, with a capital expenditure level of 17% of revenue, up from 9% the previous year. The Fund’s long-term assets expanded by 6% to 26.6 trillion tenge, while current assets increased by 18%, bolstered by a 17% rise in inventories and a 19% increase in receivables.

    The asset structure saw a notable rebalancing of cash and deposits: cash holdings decreased by 7% to 2.7 trillion tenge, and bank deposits fell by 23%, with tenge deposits down by 27% and dollar deposits up by 18%. The overall asset growth of Samruk-Kazyna was driven by an increase in equity by 10%, a rise in retained earnings and non-controlling interests, and a 10% growth in liabilities. The liabilities included a reduction in fixed-rate loans by 9% and an increase in floating-rate loans by 19%, mainly short-term. The Fund’s short-term liabilities are now covered by cash at a rate of 61%, down from 71% the previous year. The currency composition of loans has remained consistent since 2022, with 58% in US dollars, 34% in tenge, and 4% each in Swiss francs and euros.

    In 2023, the Fund’s revenue increased by 4%, driven by a modest rise in crude oil sales, which account for 30% of revenue, alongside declines in refined petroleum products and refined gold sales. These decreases were offset by significant growth in other sectors, including rail freight transport (up 30%), uranium sales (up 44%), and gas processing products (up 10%). The revenue growth was accompanied by a comparable increase in production costs, mainly due to a 23% rise in labor costs and a 15% increase in depreciation and amortization expenses. The Fund reported total write-downs of 262 billion tenge, five times higher than in 2022. Net profit decreased by 10% to 2.1 trillion tenge, largely due to a significant reduction in earnings from joint ventures and associates.

    The relationship between Samruk-Kazyna and its sole shareholder, the government of Kazakhstan, remains complex. In 2023, total net cash distributions to the shareholder amounted to 1.3 trillion tenge, up from 306 billion in 2022. This included dividends of 1.27 trillion tenge, as well as other distributions for projects such as the construction of healthcare facilities and a sports complex. Meanwhile, the government recapitalized the Fund with 49 billion tenge, earmarked for infrastructure development in the National Industrial Petrochemical Park in Atyrau.