Performance
Group projects
RTIO's growth strategy has involved a commitment of more than US$9 billion to expand the global production platform for iron ore since 2003. The feasibility study into expanding Pilbara capacity beyond 220 Mt/a capacity by 2012 was well advanced before the economic slowdown began in the third quarter of 2008.
Rio Tinto spent A$103 million in the Pilbara on evaluation of iron ore deposits that form part of the medium to long term production plan. Evaluation in 2008 largely focused on the Nammuldi/Silvergrass region and the Rhodes Ridge Joint Venture and Brockman 4 sites.
RTIO is reassessing the expansion in the context of the current economic situation. A decision is expected in the first half of 2009, and a number of critical components of the expansion have continued unchanged.
Upgrade beyond 220 Mt/a
Rio Tinto has introduced an aggressive expansion programme during the past five years, and remains well positioned to execute the next phase in its strategy. Cape Lambert has been nominated as the preferred site for expansion of Pilbara port facilities beyond 220 Mt/a. Early planning for reaching 320 Mt/a involves construction of a new terminal (Cape Lambert West) capable of berthing four Capesize ships, and vacant and available land to the west of the existing rail line was selected to accommodate stockpiles under this plan.
During 2009 the economic slowdown may lead to reduced competition, which may provide options for accelerated execution of some projects, as well as improved cost expectations when there are credible signs of market recovery. A key goal of RTIO's cutbacks in operations and projects is to maintain a robust platform from which to capitalise on an upturn.
Work has progressed in anticipation of the next expansion of iron ore production capacity. An array of projects designed to support increased production is under way, and some will be progressed through to completion notwithstanding the short term slowdown. These will include:
Mesa A (Rio Tinto 53 per cent), a US$901 million development of the Mesa A/Waramboo deposits, which will sustain pisolite production for the Robe River lump and fines products from 2010, when Mesa J mine stocks are scheduled for gradual depletion. Mesa A is expected to ramp up to 25 Mt/a capacity from 2011.
Brockman 4, a US$1.5 billion development of the Brockman 4 site as a 22 Mt/a capacity mine, scheduled to be completed in 2010. While there is scope to expand this to 36 Mt/a capacity subject to favourable market conditions.
Western Turner Syncline, a US$149 million study into the establishment of a new mine near Tom Price, with the ore to be fed into the latter's processing plant.
Hope Downs 4, (Rio Tinto 50 per cent) a US$71 million pre-feasibility study into developing the deposit, which is 45 kilometres east of the Hope Downs 1 mine. No decision has been made yet on the pre-feasibility study.
Remote Operations Centre (ROC), announced in December 2007, is a new facility located near Perth Airport, designed to accommodate staff and electronic equipment to operate by remote control a range of assets and processes in the Pilbara. The new building, big enough for 350 people, is under construction and is expected to be completed in mid-2009.
Dampier power station, a US$538 million (Rio Tinto US$425 million) new plant is expected to provide more efficient supply of power to Dampier and Cape Lambert ports and operations. The 160MW station will have four open cycle gas turbines, and a 220kV transmission line is being built to Cape Lambert from the 7 Mile Rail Operations site, where the new station is sited. When complete the new plant will replace the ageing stations at Cape Lambert and Dampier.
Mine of the FutureTM, an industry leading plan announced by Rio Tinto in January is testing the implementation of a number of innovative mining technology applications in the Pilbara. Several of these are being introduced at Pit A at the West Angelas mine, which has been designated as a pioneer site for Mine of the Future trials. The system consists of a fleet of Komatsu mining equipment that loads and hauls ore automatically. Artificial intelligence in the equipment learns the layout of the mine, how to recognise and avoid other vehicles and obstacles, and how to ferry loads from loading face to dump with the least wear and tear, delay and use of fuel. Without drivers, the system revolutionises productivity and the way mining has been conducted. The new mining process incorporates automated drilling, an alliance with Atlas Copco announced in September. The blast hole drill without an on board operator is guided by satellite GPS to sink its holes in the pit floor on a precise grid. Drilling and blasting by this method would revolutionise the speed of open pit developments.
Iron Ore Company of Canada (Rio Tinto: 58.7 per cent) In March 2008, IOC announced an investment of C$500 million to increase its annual production of iron ore concentrate to 22 million tonnes. In September 2008, it announced a further investment of C$300 million to increase annual production of iron ore concentrate to 22.8 million tonnes and pellet production to 13.8 million tonnes by 2011.
In December 2008, in response to market conditions, IOC announced the suspension of these expansion projects. A re-start will be considered once market conditions improve.
Simandou (Rio Tinto: 95 per cent) The Simandou project in eastern Guinea, west Africa, lies within one of the best undeveloped major iron ore provinces in the world. During the year RTIO conducted advanced studies into establishing an iron ore mine of 70 Mt/a capacity, and potentially of up to 170 Mt/a capacity. A number of options are being reviewed to establish the most efficient and economic means of transporting the mined ore from the project.
Rio Tinto has spent nearly US$400 million on the work necessary to develop a long life iron ore mine at Simandou. During 2008, RTIO spent an average US$20 million per month on drilling, engineering and support. RTIO has conducted exploration and development efforts throughout the 738 square kilometre concession area. A total of 16 drill rigs has been deployed to complete more than 200,000 metres of drilling on over 1,200 sites.
In August, Rio Tinto received correspondence from the Guinean Government purporting to rescind the Concession, the legality of which Rio Tinto questioned. In December it received further correspondence referring to a purported compulsory relinquishment of the northern half of the Concession whilst confirming Rio Tinto's entitlement to the southern half of the Concession. A number of political developments in Guinea since then have occurred and RTIO has engaged in top level discussions with various stakeholders in an effort to clarify the status of the project. Rio Tinto remains of the view that it has complied with all its obligations in relation to the Concession such that it is entitled to hold and retain the entire Concession. It will continue working with the Guinean Government to seek to resolve this matter on that basis.
The project has employed an average workforce of 1,800 staff and contractors across the year, 90 per cent of them Guinean, operating from offices in Conakry and Kerouane, and construction camps at Canga East and Oueleba in the mining concession.
The International Finance Corporation (the private sector arm of the World Bank Group) retains a five per cent stake in the project and is working with Rio Tinto to develop it in an environmentally and socially sustainable way.
The successful implementation of this project will include a competitive infrastructure solution, which may be dependent upon the outcome of the analysis of transportation alternatives.
Orissa, India (Rio Tinto: 51 per cent) Orissa is one of the key iron ore regions of the world. RTIO has a joint venture with the state owned Orissa Mining Corporation to develop its iron ore leases. With expectations of significant infrastructure and industrial development in India in the medium and long term, Rio Tinto remains keen to contribute to the development of the Indian iron ore sector. Rio Tinto has continued discussions with major domestic iron ore and steel companies and expects to commence mining in 2009.
