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Walsh says Rio Tinto to continue with low-cost iron-ore expansions

Rio Tinto CEO Sam Walsh

Rio Tinto CEO Sam Walsh

Photo by Bloomberg

17th April 2015

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

  

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PERTH (miningweekly.com) – Diversified giant Rio Tinto has told shareholders that the group will continue to push on with its iron-ore expansion in the Pilbara, despite the declining iron-ore price.

CEO Sam Walsh said in London this week that the company would continue with a low-capital brownfield expansion as part of its efforts to grow capacity to 360-million tonnes a year.

Rio was expected to produce 330-million tonnes of iron-ore during the full year, increasing to 350-million tonnes by 2017.

Walsh noted that the brownfield expansion would be achieved at a capital intensity of around $9/t, continuing to confirm the company’s competitive position as the world’s lowest-cost supplier of seaborne iron-ore.

“Our Pilbara expansion represents a clear and consistent strategic response to the unprecedented long-term growth in China. The world remains on a path towards greater urbanisation. It should be remembered that growth of just 1% a year is required for China to reach one-billion tonnes of crude steel production by 2030,” Walsh noted.

However, Walsh added that with iron-ore now trading at around $50/t delivered into China, Rio had to ensure that the company maintained the margin between itself and higher cost producers.

“Being the lowest-cost producer is not about a competition, or a bid to secure bragging rights. Rather, it’s fundamental to the health of our business. The global iron-ore market is in a period of transition, with high-cost supply being supplemented by low-cost production.”

He pointed out that the industry had already seen a winding back of iron-ore supply from some Chinese producers, on top of production cuts from high-cost seaborne suppliers.

“And major industry shifts of this nature never take place in a smooth and uniform manner, so we can expected continued bumps before the market settles at a new equilibrium.”

Edited by Mariaan Webb
Creamer Media Senior Deputy Editor Online

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