The Rio Tinto Ltd (ASX: RIO) share price is under the spotlight after revealing plans to expand its aluminium smelter in Canada.
The ASX mining share is best known for its iron ore operations, but it’s also involved with other commodities such as aluminium, lithium and copper.
Canada expansion plans
Rio Tinto has announced that it’s going to invest C$1.4 billion to expand its ‘start of the art’ AP60 aluminium smelter equipped with low-carbon technology at Complexe Jonquiere in Canada. This includes up to C$150 million of financial support from the Quebec government.
The expansion will coincide with the gradual closure of potrooms at the Arvida smelter on the same site.
The investment will add 96 new AP60 pots, increasing capacity by approximately 160,000 metric tonnes of primary aluminium per year, enough for 400,000 for electric cars.
As a result, there will be a total of 134 AP60 pots and a capacity of approximately 220,000 tonnes per annum. It will take two and a half years to construct, with commissioning of the new pots expected to start in the first half of 2026 and the smelter fully ramped up by the end of 2026. Once completed, the expanded smelter is expected to be “in the first quartile of the industry cost curve”, meaning within the best 25% within the industry regarding costs.
The new capacity will offset the 170,000 tonnes of capacity lost through the gradual closure of potrooms at the Arvida smelter from 2024. In addition, Rio Tinto will add 30,000 tonnes of new capacity through the commissioning of the previously announced recycling facility at Arvida in the first quarter of 2025.
Management commentary
Rio Tinto Chief Executive Jakob Stausholm said:
This investment is aligned with our strategy to decarbonise our value chains and grow in materials essential for the energy transition. Our AP60 technology is already proven and producing some of the lowest carbon aluminium in the world, thanks to the expertise of our highly qualified workforce and access to renewable hydropower. This is the most significant investment in our aluminium business for more than a decade and it will further strengthen Rio Tinto’s high-quality and low carbon offering to our customers as they also work to reduce their own carbon footprint.
Final thoughts on the Rio Tinto share price
I’m not expecting aluminium to become the biggest earnings generator for Rio Tinto, but increasing production and lowering emissions are two excellent outcomes for the resources business.
The company is cheaper than it was earlier this year, but I don’t think it’s at a great price to invest yet. I’d be willing to wait.
