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Rio Tinto Says $3.4 Billion Earmarked for Iron Ore Boost
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Global miner Rio Tinto announced on Wednesday a $3.4 billion expansion of iron ore mining in Australia, where it has mapped out a plan to lift capacity by more than 50 percent in anticipation of growing demand from Chinese steel mills.
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Greg Pease | Taxi | Getty Images |
The world's second largest iron ore producer said it expects to boost output from its mines in Australia's western Pilbara iron belt to 283 million metric tons a year by the second half of 2013, up from the current 225 million metric tons.
That would represent about a fifth of current world trade in the key steel making ingredient.
By the end of March, Rio [RIO-LN
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] said it expects to lift its operating capacity to 230 million metric tons per year. Only Brazil's Vale [VALE5.SA
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] mines more iron ore each year.
"The program 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," Rio Tinto's iron ore division chief Sam Walsh said in a statement.
Rio said its longer-term plan called for a capacity increase to 353 million metric tons a year by the end of 2015.
Rio Tinto's share of the increased investment will be $2.9 billion, with minority partners shouldering the remaining $500 million.
The Pilbara is closer to China, the world's largest iron-ore consumer, than key sources of high-grade ore in Brazil and Africa, giving Rio an advantage on shipping costs and times.
BHP Billiton [BLT-LN
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], Rio Tinto's closet rival in Australian iron ore mining, said earlier on Wednesday it was mining at an operating rate of 178 million metric tons a year as it ramps up production in the region.
Iron ore was quoted on Wednesday at $144.70 a metric ton, cost and freight delivered to China, near the highest level since November, according to the Steel Index.
BHP Billiton reported its first-half attributable profit slipped to 7 percent to $9.94 billion citing lower commodity prices, higher costs, and a slow down in demand from China.
Rio Tinto, reporting on Thursday, is tipped to show a 9 percent fall in second-half underlying earnings to $7.5 billion before one-offs.
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