Rio Tinto’s 360-million-tpy expansion in Pilbara will cost much less

Rio Tinto, the world’s second-largest iron ore miner, is going ahead with its expansion in Australia to 360 million tpy at a “significantly lower capital cost per tonne than originally planned”.

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“The breakthrough pathway we have identified, combining brownfield expansions and unleashing low-cost productivity gains, means we will deliver the expansion at an estimated capital cost of more than $3 billion below previous expectations,” its ceo Sam Walsh announced on Thursday November 28.

The majority of the growth, from a base run rate of 290 million tpy by the end of first half of 2014 to 330 million tpy in 2015, will be delivered in the next two years.

A series of low-cost brownfield expansions will bring on early tonnes to feed the expanded infrastructure currently being developed and Rio Tinto has on Thursday approved a capital expenditure of $400 million to support the brownfield expansions.

Mine production capacity will increase by more than 60 million tpy between 2014 and 2017.

Rio Tinto is still evaluating its options to optimise the next stage of “the 360 programme”.

It said expansions will be achieved primarily through a combination of expanding production at existing mines and securing further low-cost productivity gains, including the greenfield Silvergrass mine.

The investment decisions on the greenfield Silvergrass and Koodaideri mines, in Western Australia, have been deferred until the third quarter of 2014 and until 2016, respectively, at the earliest, due to the early tonnes from the brownfield expansions, Rio Tinto said.

The phase two expansion for port, rail and power infrastructure to achieve the 360 million tpy output is scheduled for completion in the first half of 2015.

The expansion is subject to government and joint venture approvals.

“This investment is driven by the attractive long-term fundamentals for iron ore which are underpinned by urbanisation and income growth in the developing world, particularly China. By delivering these additional tonnes we will capture a greater share of demand,” Andrew Harding, Rio Tinto Iron Ore’s ceo, said.