Rio Tinto approves $3.4bn Pilbara expansion

published 8 February 2012

Mining giant Rio Tinto has committed a further $3.4bn to the expansion of its Pilbara iron ore operations in western Australia.

Some $2.2bn will be invested to extend the life of the Nammuldi iron ore mine, which is expected to increase production capacity in Pilbara to 283m tonnes a year (Mt/a) by the second half of 2013.

A further $1.2bn (of which Rio will pay $0.7bn) will be used for Cape Lambert port and rail early works need for the proposed capacity expansion to 353 Mt/a. The 353 Mt/a expansion is in final feasibility study, with a final investment decision expected later this year, Rio said.

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The total amount payable by Rio will be $2.9bn.

"Today we are announcing another significant milestone in our drive towards a more than 50 per cent increase in the size of iron ore operations in Western Australia," said Rio's Iron Ore and Australia Chief Executive Sam Walsh.

"The programme 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."

Rio estimates that the capital intensity of expansion from the current 220 Mt/a to 353 Mt/a will be in the mid-$150s per tonne, of which Rio will owe around $130 per tonne.