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Asset flexibility strategy to deliver value

27th July 2018

     

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Metals and mining corporation Rio Tinto’s Iron Ore business aims to continue to deliver superior value for its shareholders by developing greater flexibility across its system of mines, rails and ports in Western Australia so that it is capable of dynamically responding to changes in market and customer demands.

“Removing our bottleneck in rail and increasing flexibility remains a key priority,” Rio Tinto Iron Ore chief executive Chris Salisbury stated in a press statement last month, noting that the company is making significant strides in levelling out rail and mine capacity. He emphasised that Rio Tinto’s rail infrastructure should be in line with mine capacity by the end of next year.

Rio Tinto will continue to optimise the system to provide the flexibility to respond to market conditions. “However, importantly, capacity is not the same as tonnes shipped. How we use the capacity of our integrated system will be dynamic, in line with a strict value-over-volume approach,” he explained.

Salisbury reiterated the company’s strategy, which is to optimise its Pilbara assets to deliver value for its shareholders. Rio Tinto Iron Ore delivered $7.3-billion of free cash flow in 2017 and the company intends to continue to maximise free cash flow by pursuing a value-over-volume approach to it production. This is achievable as the company’s product is supported by “a portfolio of world-class assets that deliver a premium iron-ore product, the Pilbara Blend”, he noted.

Productivity Improvements

Rio Tinto continues to drive productivity improvements across the business and is leveraging considerable value from innovation and new technology. Salisbury highlighted the company’s AutoHaul autonomous rail project as an example of Rio Tinto’s fortitude in making use of and developing new technology to benefit production and profitability.

“Rio Tinto’s AutoHaul is on schedule to be implemented by the end of the year, and is already delivering benefits to the business through an uplift in rail capacity.”

The company is further considering an extensive pipeline of future development options, which it continues to grow. Salisbury noted that, this year, Rio Tinto’s 700 km drilling programme is set to provide both ongoing reserve replenishment and significant optionality to optimise operations.

Rio Tinto states that more than 4 500 mine-to-market productivity initiatives are currently being pursued in Iron-Ore. These initiatives are anticipated to deliver $500-million in additional free cash flow a year by 2021, as part of a yearly groupwide target of $1.5-billion. The company’s productivity and cash focus are increasingly important, as they are intended to offset the early signs of cost inflation which are returning to the iron-ore industry.

The company also has plans to continue to benefit from the recent changes in the Chinese steel industry.

Edited by Mia Breytenbach
Creamer Media Deputy Editor: Features

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