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Rio Tinto sets out Oz iron ore plan

Rio Tinto has set out what it described as a “breakthrough plan to optimise the growth of its world-class iron ore business” in Western Australia.
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The minder said that mine production capacity will rapidly increase towards 360 Mtpa at a significantly lower capital cost per tonne than originally planned.

It explained that a series of low-cost brownfield expansions will bring on early tonnes to feed the expanded infrastructure currently being developed. From a base run rate of 290 Mtpa by the end of H1 2014, mine production capacity will increase by more than 60 Mtpa between 2014 and 2017. The majority of the low-cost growth is set to be delivered in the next two years with mine production of more than 330 Mt in 2015.

This, the firm said, will be achieved primarily through a combination of expanding production at existing mines and securing further low-cost productivity gains, such as those delivered by Rio Tinto’s “Mine of the Future” programme, together with the proposed future development of the greenfield Silvergrass mine. Work also continues on various further expansion options to optimise the next stage of the 360 programme.

In support of the brownfield expansions, Rio Tinto has approved US$400M of capital expenditure for plant equipment and modification, and additional heavy machinery for use at various mine sites in the Pilbara.

The additional production will be targeted at an all-in capital intensity of US$120-130 per tonne, including the cost of infrastructure growth and mine capacity.

“Expanding our world-class, low-cost, high-margin Pilbara operations represents the most attractive investment opportunity in the sector and is in line with my commitment to be totally focussed on only allocating capital to opportunities that will generate the best returns to shareholders,” said Rio Tinto CEO Sam Walsh.

“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 $3B below previous expectations.”

Rio Tinto Iron Ore chief executive Andrew Harding said: “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 and ensure we continue to enjoy the best returns in the industry.

“Today’s announcement reflects our team’s commitment and dedication to retaining its edge as an industry leader. I am convinced the breakthrough iron ore optimisation pathway we have unveiled today represents the best use of capital for our shareholders and that our smart use of innovative technology will drive the business forward for decades to come.”

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