Rio Tinto has approved the next stage in the development of Richards Bay Minerals (RBM) in South Africa through the construction of the Zulti South project.
The US$463M investment (of which Rio Tinto’s share is US$343M) is intended to sustain RBM’s current capacity and extend mine life.
RBM currently operates four mines in the Zulti North lease area, a mineral separation plant and smelting facility. The Zulti North ore body grade is declining, and so the Zulti South mine is required to maintain the output of high-margin zircon and rutile, and provide sufficient ore to support TiO2 sales.
Rio Tinto said that the Zulti South mine (phase 1) will underpin RBM’s supply of zircon and ilmenite over the life of mine.
Construction is scheduled to start in mid-2019, subject to the granting of all necessary permits, with the first commercial production expected in late 2021.
The investment will be fully self-funded from RBM’s cash flows, with no additional debt or recourse to Rio Tinto. The project is expected to deliver an internal rate of return of 24% (Rio Tinto share).
Jean-Sébastien Jacques, CEO of Rio Tinto, said: “Rio Tinto has a long history in South Africa, and today’s investment underscores our commitment for the coming decades and beyond.
“Zulti South is one of the best undeveloped minerals sand deposits in the industry, and will significantly extend RBM’s position as a world-class, first-quartile asset.
“The long-term fundamentals of the market remain strong, and production from Zulti South will commence in time to fill a widening supply gap, ensuring RBM’s position as a leader in the sector, and delivering strong returns to our shareholders.”
Bold Baatar, CEO of Rio Tinto Energy & Minerals, commented: “RBM is an outstanding business, South Africa’s largest mineral sands producer and, equally importantly, a fully beneficiated metallurgical complex.
“We not only mine, but produce value-added products for customers around the world. We are proud of the value we create, and retain, in South Africa. This is underscored by our position as KwaZulu-Natal’s leading taxpayer, paying US$79M in taxes and royalties in 2018 alone.
“Our investment in Zulti South will ensure we maintain our contribution to the province and our partner communities. We want to recognise the support from the Government of South Africa, the KwaZulu-Natal provincial leadership and, most importantly, the invaluable support of our host communities – Mbonambi, Sokhulu, Mkhwanazi and Dube – in securing the future of this world-class business.”