Rio bets big on iron ore with $3.7bn Pilbara boost
Rio Tinto is putting its money where its mouth is, backing up its confidence in Chinese iron ore demand with significant spending on its Pilbara operations.
Cape Lambert port.
The company has announced a $US3.7bn investment in its Pilbara iron ore operations at a time while rival BHP Billiton is adopting a more conservative outlook.
Rio is targeting a 25% ramp up of its Pilbara production over the next four years, to raise exports to 353mtpa.
The company has committed $4.2bn in global iron ore investments. Contributions from joint venture partners will take the figure to $6.2bn.
In total, $5.2bn will be ploughed into the Pilbara, while the remaining $1bn will be spent on infrastructure at its Simandou iron ore project in Guinea, West Africa.
Rio Tinto Iron Ore chief executive, Sam Walsh, predicts a positive outlook for medium to long term iron ore to be driven by Chinese demand.
“We continue to forecast that annual Chinese steel production will grow from its current level of around 700mt to around 1bn tonnes a year out towards 2030.”
Meanwhile BHP Billiton chief executive, Marius Kloppers, recently signalled that the copany is reconsidering proposed infrastructure expansion, namely the $20bn Port Hedland outer harbour project.
Rio’s plans for the Pilbara are in stark contrast, with a gas fired power plant, two new berths and related infrastructure at its Cape Lambert port on the cards.
It will also invest to extend the life of the Yandicoogina mine to 2021 and increase its capacity.
At Simandou, Rio will invest in detailed design studies, early works and long-lead item, which the company said is primarily port and rail infrastructure. Rio is targeting a staged ramp-up of the mine, leading to production on 2015.
Rio Tinto said the latest announcement does not affect its previously announced $16bn capital expenditure package for 2012.