* CEO says integrity, code of conduct non-negotiable
* Watching brief on M&A, but only if it adds shareholder value
* CEO favours gearing below guidance level
By Barbara Lewis and Sanjeeban Sarkar
LONDON/BENGALURU, Dec 6 (Reuters) - The copper market will go into deficit by 2020, just when Rio Tinto's RIO.L RIO.AX extension to the Oyu Tolgoi mine in Mongolia comes onstream, the company said on Tuesday.
Rio Tinto gave approval in June for a $5.3 billion expansion of Oyu Tolgoi, one of the world's largest copper mines and a project central to the major's efforts to become less dependent on iron ore.
While the iron ore market is expected to stay in oversupply for the foreseeable future, the copper market faces diminishing supplies and the prospect of increased demand, driven by infrastructure, electric vehicles and other renewable technologies.
Arnaud Soirat, chief executive of Rio's copper and diamonds division, said he took a "cautiously optimistic" view the copper market would go into deficit by 2020. Some analysts think the deficit could be earlier.
He said Oyu Tolgoi was on time and on budget, with first production expected in 2020 and a full ramp up by 2027.
Soirat became head of the copper division as Jean-Sebastien Jacques, praised by analysts for his work on Oyu Tolgoi, became CEO at the start of July. Tinto operates Oyu Tolgoi, which is 66-percent owned by Canadian copper miner Turquoise Hill Resources Ltd TRQ.TO . The Mongolian government holds the other 34 percent.
Asked whether he was concerned about governance issues in Mongolia given Rio's problems in Guinea, Jacques said only that integrity was non-negotiable.
"I take integrity very seriously, I take our code of conduct very seriously. It's absolutely non-negotiable. We must do the right thing where we operate," he told analysts in London.
He said he could not comment on Guinea beyond formal statements made in November when Rio announced it had sacked two executives following an internal investigation into $10.5 million in payments to an adviser. Tinto is regarded by many analysts as having one of the strongest balance sheets in the sector, but like Glencore GLEN.L during its analyst presentation last week, it said it was focused on limiting debt. gearing is around 23 percent at the lower end of guidance of between 20-to-30 percent, Rio said.
"I think we would feel much more comfortable in the lower numbers than in the 20-to-30 percent gearing at this point in time," Jacques said, referring to uncertainties about the massive Chinese market.
Jacques also remains cautious about mergers and acquisitions.
"We have a watching brief on M&A, but we will pursue an acquisition only if it creates value for shareholders," he said.
(Editing by Susan Thomas)