AFP

Stackers and reclaimers moving iron ore to rail cars.

Global resources giant Rio Tinto has committed a further US$3.4 billion (Rio Tinto share $2.9 billion) to the major expansion of its Pilbara iron ore operations in Western Australia.

The investment comprises US$2.2 billion (Rio Tinto 100 per cent) to extend the life of the Nammuldi iron ore mine. With this funding, the project to increase production capacity in the Pilbara to 283 million tonnes a year (Mt/a) is now fully approved, the company said on Wednesday.

Some $1.2 billion (Rio Tinto share US$700 million) for Cape Lambert port and rail early works is needed for the proposed capacity expansion to 353 Mt/a. The 353 Mt/a expansion is in final feasibility study stages, with a final investment decision expected later this year.

Rio Tinto expects capital intensity of expansion from 220 Mt/a to 353 Mt/a to be around mid-US$150s per tonne, on a 100 per cent basis (Rio Tinto share around mid-US$130s per tonne).

Rio Tinto Iron Ore and Australia chief executive Sam Walsh said “We believe we have the best quality iron ore expansion projects anywhere in the world. They are high return, low risk investments that are highly value-adding for shareholders.

“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. 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.”

Production capacity of 283 Mt/a in the Pilbara operations will be reached in the second half of 2013. The Nammuldi expansion will deliver first ore in the third quarter of 2014, and there will be a transitional period until then in which ore will come from other mines to reach 283 Mt/a.

The Nammuldi project will extend existing mining below the water table, increasing the mine's life by 14 years, at a production rate of approximately 16 million tonnes a year.

The Cape Lambert funding follows other early works investments already underway. Plans to increase capacity at the port have been enhanced by further plans to replace an ageing car dumper with a new dual car dumper, contributing an additional 20 Mt/a to take Cape Lambert capacity to 203 M/ta in 2015.

The works and plans remain subject to a number of joint venture and regulatory approvals, including environmental clearances, which are expected later this year. - I-Net Bridge