JPM-Rio Tinto plc Deep Dive：Resolution Copper–$20bn capex...-20251015

Lyndon Fagan, JPM Head of APAC Basic Materials and lead analyst for Rio Tinto Ltd, has undertaken a detailed analysis of the Resolution copper project in USA.The recent RIO & BHP CEO meetings with President Trump put the Resolution Copper project in Arizona (RIO/BHP : 55%/45%) back in the spotlight. Lyndon estimates capex to be $20bn (ex ~$2.5bn sunk), with FID in 2029, followed by a ~9yr build, first ore in year 6 (2035), and nameplate ~600ktpa copper in year 12 (2041). From an approvals perspective, the project still requires a land swap, faces legal challenges and continues to be opposed by one of 11 traditional owner groups.At $5/lb (real) copper, the project generates a 17% IRR and an attractive $18bn NPV (RIO share $10bn @ 8.6% WACC / $5/lb LT copper), based on our C1 cost assumption of US$0.81/lb (incl. by-product credits in 2035 terms). Resolution offers a strong growth option for BHP/RIO beyond the current pipeline of projects,but remains technically challenging and capital intensive (JPMe $32k/t), with the timeline to approval unclear. We rate both Rio Tinto Plc and Rio Tinto Ltd as Overweight.

•$20bn capex for ~600ktpa copper: Resolution has had almost $3bn spent on it already. We expect the proposed 44Mtpa concentrator to cost ~$7bn (based on BHP’s estimated cost for a new plant at Escondida), with the block cave construction to be ~$13bn (based on Oyu Tolgoi’s underground cost of ~$8bn,inflation and scope adjusted). The $20bn investment going forward will reward the project owners with ~600ktpa copper output (RIO 55% / BHP 45%) making it one of the world’s largest mines. We have not included a copper smelter in our project model (the approvals documents don’t consider a smelter), which could add $5bn+ to the scope if downstream beneficiation & onshore investment become a greater focus under the current US Administration.