Rio Tinto has committed a further $3.4 billion (Rio Tinto share $2.9 billion) to the major expansion of its Pilbara iron ore operations in Western Australia; a total of $2.2 billion (Rio Tinto 100%) to extend the life of the Nammuldi iron ore mine. With this funding, the project to increase production capacity in the Pilbara to 283 million metric tons per year (mt/y) is now fully approved. An additional $1.2 billion (Rio Tinto share $700 million) will be invested at the Cape Lambert port and rail works, which is needed for the proposed capacity expansion to 353 million mt/y. The expansion is in final feasibility study, with a final investment decision expected later this year.

Rio Tinto expects capital intensity of expansion from 220 million mt/y to 353 million mt/y to be around mid-US$150/mt, on a 100% basis (Rio Tinto share around mid-US$130/mt).

“This another significant milestone in our drive toward a more than 50% increase in the size of iron ore operations in Western Australia,” said Sam Walsh, chief executive, Rio Tinto Iron Ore. “The program remains on track and we are bringing new iron ore production on stream at a time when demand from Asian markets is forecast to grow strongly, while industry supply growth remains constrained.”

Production capacity of 283 million mt/y in the Pilbara will be reached in the second half of 2013. The Nammuldi expansion will deliver first ore in the third quarter of 2014, and there will be a transitional period until then in which ore will come from other mines to reach 283 million mt/y.

The Nammuldi project will extend existing mining below the water table, increasing the mine’s life by 14 years, at a production rate of approximately 16 million mt/y.