Rio Tinto takes next steps in its iron ore development plans |
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Rio Tinto is taking the next steps in its phased investment programme by
committing US$4.2 billion (100 per cent basis US$6.2 billion) to develop its
tier one iron ore business. The investment covers US$3.7 billion (100 per cent
basis US$5.2 billion) for expansion of the industry-leading Pilbara iron ore
operations in Western Australia and US$501 million (100 per cent basis US$1.0
billion) for further infrastructure development at the Simandou iron ore project
in Guinea.
Rio Tinto chief executive Tom Albanese said “We are directing investment to
projects that will generate the most attractive returns for shareholders and are
resilient under any probable macroeconomic scenario. Our superior Pilbara iron
ore business has one of the highest margins in the industry, low capital
intensity of investment and a strong track record of completing projects on time
and budget.
“Today’s announcement is in line with our long-held strategy of investing in
and operating long-life, low-cost, tier one assets, and consistent with our view
of the economic outlook. We are mindful of short-term uncertainties, and remain
fully committed to a balanced approach to investment, while maintaining a single
A credit rating and a progressive dividend policy.”
Rio Tinto is tightly managing its overall investment programme, retaining
flexibility and taking steps to reduce and re-phase capital expenditure as
appropriate. The project approvals announced today do not affect the previously
announced capital expenditure outlook of US$16 billion in 2012.
Rio Tinto Iron Ore chief executive Sam Walsh said “We continue to see
positive prospects for medium- to long-term iron ore demand driven by ongoing
growth in Chinese consumption. We continue to forecast that annual Chinese steel
production will grow from its current level of around 700 million tonnes to
around one billion tonnes a year out towards 2030. This demand growth is coupled
with an increasingly challenged supply response, as several high-profile
competitor projects have recently been either delayed or postponed.
“Our Pilbara expansion is already well underway, positioning us to capture
the opportunities of this market environment. And we have the natural advantages
of a readily-expandable Rio Tinto-operated port and proximity to the Chinese
market.
“The investment we and our partners are making in Simandou takes us a step
further towards the phased development and ramp up of a new world-class iron ore
resource. Further investment will be made as the Government of Guinea
progresses its financing strategy and grants approvals for the next steps in
developing rail and port infrastructure. The experience gained in expanding our
Pilbara operations will be invaluable as we develop Simandou.”
The US$4.2 billion (100 per cent basis US$6.2 billion) comprises:
Pilbara 353 million tonnes a year (Mt/a) iron ore expansion project and
mine life extension, Western Australia
Rio Tinto investment of US$2.0
billion (100 per cent basis US$3.5 billion) over the next four years to complete
the port and rail elements of the project to expand iron ore production capacity
in the Pilbara to 353 Mt/a in the first half of 2015. Of the total US$3.5
billion investment for this infrastructure expansion, US$2.9 billion will be
used for an additional two berths on the new Cape Lambert jetty and wharf, the
replacement of the existing original Cape Lambert rail car dumper, and the Rail
Capacity Enhancement project which includes a significant amount of rail track
duplication and rolling stock improvements. US$570 million will be spent on a
new gas-fired power station at Cape Lambert, which will be more energy-efficient
and produce significantly lower carbon emissions than its predecessor.
A further US$1.7 billion (Rio Tinto share 100 per cent) of largely sustaining
capital expenditure to extend the life of the Yandicoogina mine in the Pilbara
to 2021 and expand its nameplate capacity from 52 Mt/a to 56 Mt/a. A wet
processing plant will also be added in order to maintain product specification
levels and provide a platform for future potential expansion. Extending the life
of Yandicoogina demonstrates how Rio Tinto can derive additional value from its
existing tier one Pilbara assets.
The key component of the project still requiring approval is further mine
production capacity. The expansion is subject to a number of West Australian
Government and joint venture partner approvals.
The expansion of the Pilbara iron ore business to 353 Mt/a consists of the
following stages:
Simandou iron ore project, Guinea
Rio Tinto investment of US$501
million (100 per cent basis US$1 billion) in detailed design studies, early
works and long-lead items. This is primarily for rail and port infrastructure
with first commercial production planned for mid-2015. In Simandou, Rio Tinto
plans staged funding approvals with its partners for a progressive ramp up of
the operation which will become a long-life, low-cost operation producing one of
the highest grade iron ores on the market.
Timing of the ramp up is dependent on receiving necessary approvals from the
Government of Guinea and on the Government of Guinea progressing and finalising
its financing strategy.
About Rio
Tinto
Rio Tinto is a leading international mining
group headquartered in the UK, combining Rio Tinto plc, a London and New York
Stock Exchange listed company, and Rio Tinto Limited, which is listed on the
Australian Securities Exchange.
Rio Tinto's business is finding, mining,
and processing mineral resources. Major products are aluminium, copper,
diamonds, thermal and metallurgical coal, uranium, gold, industrial minerals
(borax, titanium dioxide and salt) and iron ore. Activities span the world and
are strongly represented in Australia and North America with significant
businesses in Asia, Europe, Africa and South America.
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Wednesday, June 20, 2012
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