Rio Tinto, the world's second-largest iron ore miner, said Thursday it is focusing on productivity and is choosing value over volumes shipped of iron ore from its operations after a period of exponential supply growth in Western Australia saw it catch up with Vale of Brazil.
Rio Tinto said Pilbara shipment guidance for 2017 was unchanged at 330 million-340 million mt of iron ore, from 325 million-330 million mt in 2016, and 318.5 million mt realized sales in 2015, in an investor presentation in Sydney by CEO Jean-Sebastien Jacques and iron ore head Chris Lynch. Pilbara products are mainly sold to China, Japan and also to South Korea and Taiwan.
Pilbara iron ore saw a 58% margin on a FOB EBITDA basis in January to June 2016, it said. Spot prices of fines and lump, along with grade differentials have been trending higher recently.
The highlighted plan includes operational flexibility for the Pilbara chain around the available 360 million mt/year port capacity, with further optimization on offer, against a wider group $5 billion productivity saving plan for generating free cashflow.
"This includes potential enhancement of mine capacity through productivity improvements and replacement of depletion through low capital cost brownfield investment, including Yandicoogina Oxbow and West Angelas Deposit F," it said.
Rio Tinto added that the 20 million mt/year Silvergrass project with a capital intensity of $29/mt and an IRR of more than 100% remains on track for completion in the second half of 2017.
"Over the next three years, sustaining capital expenditure in the Pilbara is expected to be around $2.2 billion and replacement mine capital expenditure around $1 billion. One option following the brownfield replacement mines is the next greenfield Pilbara development, Koodaideri, with capacity of around 40 million mt/year and capital expenditure of around $2.2 billion from late 2019. First ore will potentially be available by 2021."
The iron ore logistics AutoHaul project is expected to advance during 2017 and be fully implemented by the end of 2018, it added.
