Rio confirms iron-ore expansion to 350Mt/y by 2017

http://www.miningmagazine.com/panorama/rio-confirms-iron-ore-expansion-to-
350mty-by-2017
Panorama

Publishing Date 29 Nov 2013 9:47am GMT

Author Mining Magazine Processing Loading & Hauling Crushing & Conveying Drilling &
Blasting

Rio Tinto said it would go ahead with plans to increase iron-ore production capacity from Western
Australia to at least 350Mt/y by 2017, primarily via the expansion of existing operations and productivity
gains.
From a base run rate of 290Mt/y – planned by the end of the first half of 2014 – Rio said it would increase
mine production capacity by more than 60Mt/y over three years.
Rio had previously approved the spending of US$7.8 billion on port and rail development for an expansion
to 360Mt/y, but had not confirmed a strategy for its mine growth.
Through the expansion of low-cost brownfield operations, most of which will come on line in the next two
years, as well as technological developments, the company expected to save more than US$3 billion from
the original US$5 billion it first tabled for the expansion.
Rio chief executive Sam Walsh: “Expanding out world-class, low cost, high-margin Pilbara operations
represents the most attractive investment opportunity in the sector and is in line with my commitment to
be totally focused on only allocating capital to opportunities that will generate the best returns to
shareholders.”
The confirmed expansion comes on top of BHP Billiton, Vale SA and Fortescue Metals Group Ltd’s planned
iron-ore growth over the next four years and adds to analysts’ worries over producers flooding the market
and pushing prices down in the near-term.
“While promoting a flood of new supply is not encouraging for the iron-ore price longer-term, the reality
is, in our view, that if Rio doesn’t do it, others will,” Hunter Hillcoat from investment bank Investec said.
As part of its commitment, Rio approved US$400 million of capital expenditure for plant equipment and
modification, and additional heavy machinery for use at various mine sites in the Pilbara of Western
Australia.
Andrew Harding, chief executive of the iron ore division said that the expansion would allow Rio to
“capture a greater share of demand”.
The increase towards 360Mt/y in output would be achieved at a “world-class” all-in capital cost of US$120-
US$130/t (or around US$100/t for Rio alone, excluding project partners).
In the announcement, the company said it was deferring investment decisions on both of its greenfield
projects – Silvergrass and Koodaideri – until the September quarter of 2014 and 2016, respectively.
That said, when Rio calculated that Western Australia capacity would hit 350Mt/y by 2017, it assumed
production will go ahead at Silvergrass.