Rio Tinto Takes Next Steps in Its Iron Ore Development Plans

Jun. 21 - Rio Tinto is taking the next steps in its phased investment program by committing USD 4.2 billion (100% basis USD 6.2 billion) to develop its tier one iron ore business.

1. USD 3.7 billion (100% basis USD 5.2 billion) for expansion of the Pilbara iron ore operations in Western Australia

Rio Tinto investment of USD 2.0 billion (100% basis USD 3.5 billion) over the next four years to complete the port and rail elements of the project to expand iron ore production capacity in the Pilbara to 353 million tonne per annum in the first half of 2015. Of the total USD 3.5 billion investment for this infrastructure expansion, USD 2.9 billion will be used for an additional two berths on the new Cape Lambert jetty and wharf, the replacement of the existing original Cape Lambert rail car dumper, and the Rail Capacity Enhancement project which includes a significant amount of rail track duplication and rolling stock improvements. USD 570 million will be spent on a new gas fired power station at Cape Lambert, which will be more energy efficient and produce significantly lower carbon emissions than its predecessor.

A further USD 1.7 billion (Rio Tinto share 100%) of largely sustaining capital expenditure to extend the life of the Yandicoogina mine in the Pilbara to 2021 and expand its nameplate capacity from 52 Mt/a to 56 Mt/a. A wet processing plant will also be added in order to maintain product specification levels and provide a platform for future potential expansion. Extending the life of Yandicoogina demonstrates how Rio Tinto can derive additional value from its existing tier one Pilbara assets.

The expansion of the Pilbara iron ore business to 353 million tonne per annum consists of the following stages:
A. 225 Mt/a by Q1 2011 - Dampier port debottlenecking (complete)
B. 230 Mt/a by end Q1 2012 - Dampier port incremental (complete)
C. 283 Mt/a by Q4 2013 - Cape Lambert 53 Mt/a increment (in implementation)
D. 353 Mt/a in H1 2015 - Cape Lambert 50 Mt/a increment and car dumper replacement 20 Mt/a increment (infrastructure approved)

The key component of the project still requiring approval is further mine production capacity. The expansion is subject to a number of West Australian Government and joint venture partner approvals.

2. USD 501 million (100% basis USD 1.0 billion) for further infrastructure development at the Simandou iron ore project in Guinea

This is primarily for rail and port infrastructure with first commercial production planned for mid 2015. In Simandou, Rio Tinto plans staged funding approvals with its partners for a progressive ramp up of the operation which will become a long life, low cost operation producing one of the highest grade iron ores on the market.

Mr Tom Albanese CEO of Rio Tinto said “We are directing investment to projects that will generate the most attractive returns for shareholders and are resilient under any probable macroeconomic scenario. Our superior Pilbara iron ore business has one of the highest margins in the industry, low capital intensity of investment and a strong track record of completing projects on time and budget.”

He said “Today's announcement is in line with our long held strategy of investing in and operating long life, low cost, tier one assets, and consistent with our view of the economic outlook. We are mindful of short-term uncertainties, and remain fully committed to a balanced approach to investment, while maintaining a single A credit rating and a progressive dividend policy.”

Timing of the ramp up is dependent on receiving necessary approvals from the Government of Guinea and on the Government of Guinea progressing and finalising its financing strategy.