- Annual Review 2006
- Overview
- Chairman's message
- Interview with the chief executive
- Selected financial data
- Features
- Review of operations
- Financial information by business unit
- Summary financial statements
- Australian Corporations Act - summary of ASIC relief
- Independent auditors' statement
- Management overview
- Directors' report
- Remuneration report
- Corporate governance
- Audit committee charter
- Shareholder information
- Useful addresses
- Investor calendar
- Publications
When the ships come in
Increased iron ore production can only be handled by better ports.
When the Japanese ore carrier Houn Maru set sail from Dampier at midday on 22 August 1966 with Hamersley Iron's first product shipment, it was "filled to the gunwales" with 52,000 tonnes of freshly mined iron ore from the new Mount Tom Price mine in the Pilbara.
It had taken 15 hours to load, the first such operation at the equally new port of Dampier, which had emerged from the mud flats only that year to be the terminal for the train lines that snaked their way from hundreds of miles inland.
Dramatic stuff, but while historically significant, the Houn Maru's physical size appears, 40 years later, considerably less imposing.
In December 2006 the same Dampier port was visited by the MV Berge Stahl ("Steel Mountain" in Norwegian), a leviathan with a load capacity seven times that of the Houn Maru. The MV Berge Stahl, at 340 metres long and 65 metres wide, is the largest iron ore carrier in the world. Its load capacity of 360,000 tonnes nearly doubles the 200,000 tonne capacity of the ships more frequently seen near the Dampier Archipelago.
It signals that the future will be different, as larger carriers become a regular feature of the iron ore freight business. There will be others, and they will be larger still. Just as the capacity of carriers visiting Western Australia has progressively increased since the early 1990s, particularly from China, so has the sheer number of visits. Taken together, the rapidly expanding character of seaborne iron ore freight highlights the timeliness of the expansions of Rio Tinto Iron Ore's port operations at Dampier and at Cape Lambert (53 per cent owned through Robe River Iron Associates).
The largest carriers nowadays leave Dampier at less than capacity, the depth of the shipping lanes being insufficient to accommodate the draught of a full load, but that too is changing, as current production capacity and industry demand for iron ore soars. And all the while, more of the traditional size carriers will visit, and they must continue to be accommodated by the expanded port facilities.
Just five years ago the prospect of handling so many vessels, including the megacarriers, would have alarmed the hearts of many. Back then, the port had the capacity to export 74 million tonnes of iron ore annually. It had half the berth capacity, a little over a third of its stockpile capacity, and mine and rail infrastructure and output were equally limited.
Fast forward to 2007 and it's a different story. Close to US$5 billion has now been committed to expansions to port, rail, power and mine assets since 2003. Rio Tinto's Pilbara iron ore network is world class and competitively placed to capitalise on the continued strong demand for iron ore products internationally.
Following the completion of the second stage upgrade later this year, the Dampier ports alone will have the capacity to export 140 million tonnes of iron ore - only three million tonnes shy of the entire volume of iron ore exported from all three Rio Tinto ports in the Pilbara in 2005. The second stage has included the installation of a new car dumper, a new screen house, a wharf extension of 144 metres and the replacement of an existing ship loader. Impressive as this expansion has been, the fact that it is being achieved with minimal disruption to so-called "business as usual" (shipping at record levels) is remarkable.
Further opportunities beckon. The Cape Lambert port has a current annual capacity of 55 million tonnes. A decision on further expanding the annual rated capacity to 80 million tonnes has just been made - allowing a concurrent berthing of four very large bulk carriers, replacement of the original shiploader, an additional reclaimer in the stockyard and improved yard and rail infrastructure. The wharf will be extended 256 metres to accommodate the new configuration.
One of the berths will have the capability to load the new breed of oversized carriers. The expansion follows the completion of the cyclone-proof tug harbour at Cape Lambert in 2006 - the significance of which was underlined by an unprecedented succession of tropical cyclones that battered the coast over the wet season. The port, unlike Parker Point and East Intercourse Island at Dampier, is more exposed to the open ocean. Combined, the ports should ensure shipments continue apace with rapidly expanding mining operations.
The expansion of Cape Lambert is the final infrastructure work required to achieve a sustainable 220 million tonnes annual port capacity. Rio Tinto has gone to great lengths to ensure local community concerns on issues such as dust prevention have been addressed.
Port expansions have allowed Rio Tinto to consolidate its position in the iron ore market. They help the Group satisfy the massive hunger for iron ore from more recent customers in China, as well as traditional consumers such as Korea and Japan, for which the Houn Maru made its first departure 40 years ago.