Quitting coal: the real reason Rio Tinto is abandoning the black rock

MINING titan Rio Tinto is abandoning coal, but not because of concerns about the environment, its boss says. Instead, he says, the company has its eyes on a shiny new prize.

RIO Tinto chief Jean-Sebastien Jacques has lifted the veil on the mining giant’s rapid retreat from the coal market, saying it is eyeing a new prize.

The electric vehicle “revolution” — not reputational risk — has driven the mining titan’s $10 billion exit from coal, he says.

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Mr Jacques says the global switch to electric vehicles is “absolutely” going to happen and Rio’s sale of coal assets has given the miner the financial firepower to pursue growth projects in copper and aluminium, which will experience strong demand.

Rio Tinto chief Jean-Sebastien Jacques says we are on the cusp of transport revolution.

The French-born chief of the Anglo-Australian mining heavyweight made the comments as he bedded down the sale of Rio’s last-remaining coal assets in a series of deals that mean it is the only global mining house not to dig up the black rock.

Industry leaders such as Rio and BHP Billiton have been targeted by activists for producing thermal coal — used in power plants — as well as providing financial support to industry groups that lobby for coal use.

Growing numbers of sovereign wealth and investment funds have sold out of companies that make their money from fossil fuels, particularly coal.

But Mr Jacques said Rio’s decision to stop mining coal had nothing to do with questions around brand or reputation.

Rio is pulling out of the coal market.

The decision was simply about Rio being able to put investment dollars where it thought the next wave of demand for metals was going to come from, he said.

“It’s purely portfolio allocation,” Mr Jacques said in the wake of the Hail Creek sale.

“Today when I look at the pipeline of projects, I have much better options for investing in iron ore, copper, bauxite and aluminium than I do in coal.

“Therefore you have to make choices — that’s what it is about, nothing more.

“If you know you have assets in your portfolio — they are very good assets but they will not attract capital because you have already earmarked the capital elsewhere — I believe our duty is to find a new set of owners that will absolutely love those assets and invest in those assets.”

Macca’s perspective

Mr Jacques said Rio was a big believer in electric vehicles, which would drive demand for metals such as lithium, copper, aluminium and nickel.

China was set to become a leader in the uptake of electric vehicles and mega cities such as Beijing and Shanghai could convert their public transport networks to electric vehicles within five years, Mr Jacques said.

“Do I believe in the EV revolution? Absolutely,” Mr Jacques said.

“Do I believe China will take a leadership role in that space? Absolutely. It’s work in process.”

Rio Tinto is investing in a lithium project in Serbia called Jadar that could become the world’s third-biggest lithium mine.

Shark Tank panellist Janine Allis, one of Australia’s early electric car converts, with her Tesla. Picture: Kylie Else

It also mulled a $US5 billion ($6.5 billion) bid to buy a stake in one of the world’s biggest lithium producers located in Chile earlier this year.

While lithium, used in batteries, has attracted plenty of investment dollars in recent years, Mr Jacques said the switch the electric vehicles would also drive demand for copper and aluminium.

Electric vehicles contain more than three times the copper of a regular vehicle and are expected to spur demand for lightweight aluminium to offset the weight of batteries.

Coal mining has been a hot topic in Australia, where protesters have railed against the Adani project in Queensland. Picture: Zak Simmonds

“I’ve got no doubt EVs will happen and therefore that is going to require lots of aluminium lots of copper,” Mr Jacques said.

Rio is ploughing $US5.3 billion into an underground expansion of a copper mine in Mongolia and $US1.9 billion into its bauxite operation in Western Australia.

Bauxite is used to make aluminium.