Rio Tinto officials have announced a breakthrough plan to optimize growth for their world-class iron ore business in Western Australia, including a production capacity increase toward 360 million metric tons per year (mt/y) at a significantly lower cost than originally planned.
A series of low-cost brownfield expansions will bring on early tons to feed expanded infrastructure currently developed, they added. From a base run rate of 290 million mt/y by the end of Q2 2014, capacity will increase by more than 60 million mt/y between 2014 and 2017.
Most low-cost growth, said company officials, will be delivered by 2015 with more than 330 million mt of production. This will come from production expansion at existing mines and the securing of further low-cost productivity — including from the company’s Mine of the Future program —along with proposed future development of the greenfield Silvergrass mine.
Rio Tinto officials have also approved $400 million of capital expenditures for plant equipment and modification for brownfield expansions, along with heavy machinery for various mine sites in Australia’s Pilbara, one of the world’s most prolific iron ore regions.
The additional production will be achieved at a world-class all-in capital intensity of $120-130/mt (low-$100/mt Rio Tinto share), including the cost of infrastructure growth and mine capacity.
CEO Sam Walsh said expanding high-margin Pilbara operations “represents the most attractive investment in the sector,” as the pathway “will deliver the expansion at more than $3 billion below previous expectations.”
Extra iron ore tons, according to Rio Tinto officials, will emanate from multiple mines, including assets in Brockman, Yandicoogina, Paraburdoo and West Angelas. Because of early tonnage delivered through brownfield expansions, they added, a Silvergrass investment has been deferred through Q3 2014 and a decision on the proposed Koodaideri greenfield mine has been postponed through 2016.
Rio Tinto will reach a run-rate capacity of 290 million mt/y through Q2 2014, following the completion of the first phase of its expanded port rail and mine operations. Second phase port expansion, including rail and power infrastructure, to reach 360 million mt/y, meanwhile, is already under way and is scheduled for Q1 2015 completion.