Operations & financial report
Diamonds and Industrial Minerals group projects
Diavik underground (Rio Tinto: 60 per cent)
Following the completion of the feasibility study in 2007 approval was given
to proceed with underground mining of the A154N, A154S and A418 kimberlites.
Additional funding of US$563 million was approved, bringing the total investment
in the underground mine to US$787 million. Under the current life of mine
plan, diamond production from underground would begin in 2009 and continue
beyond 2020.
To support underground mining, Diavik must construct new surface works including a crusher and paste backfill plant, expand its water treatment and power generating plants, and construct ancillary facilities including fuel and cement storage, and additional accommodation facilities.
About 20 kilometres of tunnels will be constructed to bring underground mining into production. The capital investment of US$563 million will be spent over the next two years, adding to the US$224 million invested in 2006-2007 for the underground feasibility studies and related capital projects.
The study into the A21 kimberlite concluded that this should not be included in reserves at this point and further project development will be conducted in 2008.
Murowa (Rio Tinto: 77.8 per cent)
The feasibility study into expanding the capacity of Murowa mining and processing
operations was completed during 2007. A decision to proceed will depend on
resolving security of tenure.
Argyle underground (Rio Tinto: 100 per cent)
Rio Tinto approved the development of an underground block cave mine under
the AK1 open pit in late 2005. It also approved an open pit cutback on the
Northern Bowl to facilitate the transition from open pit to underground mining.
The cost estimate for the project was revised to US$1.5 billion due to the
overheated Western Australian mining and construction industry and challenging
ground conditions. However, efforts continue to recover value, and some improvement
on the revised cost estimate may be possible following more rapid underground
development rates in the second half. First production from the underground
operation is expected in 2009.
QIT Madagascar Minerals (Rio Tinto 80: per cent)
The project was approved in 2005 and comprises a mineral sand mine and separation
plant, and port facilities in southern Madagascar as well as an upgrade of
QIT's ilmenite smelting facilities in Canada. The Government of Madagascar
contributed US$35m to the establishment of the port as part of its Growth
Poles project funded by the World Bank. The project has maintained its schedule,
however cost inflation and foreign exchange effects have increased the cost
estimate to US$1.0 billion. Nevertheless, increased product selling prices
have meant that the project value has been maintained. First production is
expected at the end of 2008.
The mine will be a key initial customer of the deep sea multi-use public port at Ehoala, providing the base load to help establish the port. Over time, it is expected the port will make an important contribution to economic development of the region.
RTIT will manage the port operations. At the end of the life of the mine, the port will fall under the responsibility and control of the Government of Madagascar.
Extensive engagement and consultation with the Government of Madagascar and local people and leaders has taken place over many years. The World Bank is involved in a development role and non government organisations, including the Royal Botanic Gardens, Kew and Missouri Botanical Gardens, have been involved in planning environmental and conservation strategies.
Potasio Rio Colorado S.A. (Rio Tinto: 100 per cent)
The Rio Colorado potash project in Argentina lies 1,000 kilometres south west
of Buenos Aires. Potash is used principally as an agricultural fertiliser.
Evaluation of the project began in late 2003, and has included a two year
large scale trial of solution mining. This ran successfully from late 2004.
During 2007 the feasibility study was completed. Development of the project
depends on finalising permits and other agreements as well as approval by
the board of Rio Tinto. Subject to this, first production could occur in
2011. Installed capacity will be 2.9 million tonnes per year. The scale and
quality of the resource provide potential for expansion.
Kazan trona (Rio Tinto: 100 per cent)
The Kazan trona project is located 35 kilometres northwest of Ankara in Turkey.
Rio Tinto is conducting pre-feasibility studies and, upon expected approval
in 2008, will move into large scale solution mining trials. Trona is converted
to soda ash, or sodium carbonate, by dissolving ore and recrystallizing the
soda ash. Soda ash is one of oldest known and largest volume inorganic chemicals,
used primarily in the glass, chemicals, soap and detergent, and pulp and
paper industries. Kazan trona promises to be a more environmentally sustainable
commodity to meet rising global demand than chemical synthesis.
