At an investor seminar in Sydney, Australia, in early September, Rio Tinto reported that its 10-year Pilbara iron ore mine and infrastructure expansion project in Western Australia has been delivered on time and below budget at a capital cost of $14.7 billion. The company is now forecasting that its integrated Pilbara production system will deliver around 335 million metric tons (mt) of iron ore in 2016 and 350 million mt in 2017.

Rio Tinto’s iron ore annual operating costs have been reduced by almost $1 billion since 2012. Cash costs of $16.20/mt in the first half of 2015 are down from $20.40/mt for the same period in 2014.

Rio Tinto’s introduction of autonomous trucks into some of its operations is contributing to lower operating costs. After an initial ramp up, the autonomous truck fleet outperformed the manned fleet by an average of 12%, primarily by eliminating required breaks, absenteeism and shift changes. Improved utilization has allowed a reduction in fleet size, which in turn has meant lower capital expenditure. Overall, autonomous trucks have resulted in a 13% reduction in load and haul costs due to the greater efficiency.

Autonomous drills are also contributing to lower production costs. Rio Tinto’s West Angelas mine is the only fully autonomous production drill site in the world, with seven autonomous drills having drilled more than 2.25 million m. The autonomous drills deliver a production increase of around 10% over manually operated drills and an operational cost savings of 8%. Rio Tinto is now in the process of rolling out this technology at other sites.

Rio Tinto is also working on implementation of Autohaul, its autonomous train fleet, which will play an important part in the company’s next phase of maximizing value from its Pilbara operations.

The Rio Tinto investor seminar also included a detailed discussion of its long-term view of the world iron ore market. In summary, the company is forecasting that world iron ore demand will increase to about 3 billion mt/y by 2030, a 2% average annual increase from today’s levels. More than half of this expansion in demand will be supplied through the seaborne market.

Emerging markets other than China are expected to play a very important role in future iron ore demand. Underscoring this, Rio Tinto is forecasting that non-Chinese demand for steel will increase by 65% in the period to 2030, with ASEAN economies and India playing key roles.

Chinese iron ore demand will continue to be critically important, with its steel production expected to grow at a rate of 1% per year from a very high base. At the same time, Rio Tinto anticipates that China’s pattern of steel demand will change. Replacement and renewal of capital stock will become much more important, as will exports of finished goods that include steel components.

“As we move into our 50th year of exports from Australia, Rio Tinto is embarking on a new phase in our iron ore business,” Rio Tinto Iron Ore Chief Executive Andrew Harding said at the seminar. “We have spent the past decade building the best iron ore business in the world—a project that has come in on time and below initial cost estimates. We intend to optimize these new assets to deliver maximum value for shareholders and stakeholders as markets transition.

“Our long-term strategy is supported by comprehensive market analysis, leadership in people, world-class technology, and an unrelenting pursuit of productivity improvements...We are focused on realizing further costs savings through some 400 efficiency initiatives across the Pilbara.”

Resource Center Whitepapers, Videos, Case Studies