Introduction

Rio Tinto (ASX: RIO), one of the world’s largest mining companies, is exploring a potential move into the rare earths and critical minerals sector. This comes as global supply chain diversification and trade tensions reshape market priorities. At the company’s annual general meeting in Perth, CEO Jakob Stausholm revealed that the board is taking a 'serious look' at integrating these minerals into its portfolio.

Strategic Shift Towards Critical Minerals

Stausholm emphasized that Rio Tinto is not only focusing on optimizing its core iron ore operations, such as those in Pilbara and the Simandou project in Guinea, but also reshaping its aluminum, copper, and lithium businesses to align with the global energy transition. Critical minerals, often found as by-products in existing operations, could play a larger role if processed more deliberately. The company already produces scandium in Quebec and is assessing gallium production from its aluminum operations.

However, challenges remain due to the lack of a robust spot market for many critical minerals. Stausholm noted that demand must be secured before scaling up production. Chairman Dominic Barton added a cautious perspective, highlighting the limited scale of the sector and explaining why major miners have traditionally avoided it. Yet, with supply chain diversification becoming a geopolitical priority, Rio is reassessing the economics of its existing resources.

Broader Market and Geopolitical Context

Beyond rare earths, Rio Tinto is navigating a complex global landscape. Barton expressed a pragmatic stance on tariffs, stating that while the company isn’t enthusiastic about trade barriers, it can compete under the current framework due to its cost curve position. He also welcomed recent Canadian election results, which could support aluminum’s economic importance in the region, where Rio has a significant workforce.

In the US, Stausholm highlighted opportunities to collaborate with the government, citing projects like the Kennecott copper mine in Utah and the fast-tracked Resolution copper project in Arizona. He suggested that the US’s renewed focus on mining development represents a shift compared to recent decades.

Editorial Analysis

While Rio Tinto’s interest in rare earths is a logical step given the growing demand for critical minerals in green technologies, the move carries risks. The absence of a stable market and the sector’s limited scale, as Barton pointed out, could hinder profitability. Moreover, geopolitical tensions—particularly around China’s dominance in rare earths—raise questions about whether Rio can secure reliable demand and navigate potential trade disruptions. A deeper analysis of the cost-benefit ratio and long-term market trends is essential before committing to large-scale investment.

Additionally, the failure of activist hedge fund Palliser Capital’s proposal to review Rio’s dual-listed company structure (with only 19.35% shareholder support) suggests that internal restructuring is unlikely to distract from this strategic pivot. However, it underscores ongoing shareholder scrutiny of the company’s broader direction.