Rio Tinto announced on June 20, 2012, it is committing an additional $4.2 billion (100% basis $6.2 billion) to develop its iron ore business. The investment includes $3.7 billion (100% basis $5.2 billion) for expansion of its Pilbara iron ore operations in Western Australia and $501 million (100% basis $1 billion) for further infrastructure development at the Simandou iron ore project in Guinea. These project approvals do not affect the company’s previously announced capital expenditure outlook of $16 billion for 2012.

Rio Tinto is now targeting expansion of production at its Western Australia iron ore operations to 353 million mt/y (100% basis) in 2015. The expansion program includes the following stages:

  • 230 million mt/y by end of the first quarter of 2012—Dampier Port incremental (complete).
  • 283 million mt/y by the fourth quarter of 2013—Cape Lambert 53-million-mt/y increment (in implementation).
  • 353 million mt/y in the first half of 2015—Cape Lambert 50-million-mt/y increment and car dumper replacement 20-million-mt/y increment (infrastructure approved).

Over the next four years, $3.5 billion (100% basis) will be spent on infrastructure expansion at Rio Tinto properties in Western Australia, with $2.9 billion going toward an additional two berths on the new Cape Lambert jetty and wharf, 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. About $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 $1.7 billion (Rio Tinto share 100%) of largely sustaining capital expenditure is budgeted to extend the life of the Yandicoogina mine in the Pilbara to 2021 and expand its nameplate capacity from 52 million mt/y to 56 million mt/y. A wet processing plant will also be added to maintain product specification levels and provide a platform for future potential expansion.

The expansion is still subject to a number of West Australian government and joint venture partner approvals.

In Guinea, Rio Tinto’s investment of $501 million (100% $1 billion) will go toward detailed design studies, early works and long-lead items, primarily for rail and port infrastructure. First commercial production is planned for mid-2015. Rio Tinto plans staged funding approvals with its partners for a progressive ramp-up of Simandou operation. Timing of the ramp-up is dependent on receiving necessary approvals from the government of Guinea and on the government progressing and finalizing its financing strategy.

Rio Tinto Iron Ore Chief Executive Sam Walsh said, “We continue to forecast that Chinese steel production will grow from its current level of around 700 million mt/y to around 1 billion mt/y out toward 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.”