Rio Tinto continues to commit to significantly higher spending in Australia in the wake of the settlement of the federal election.
Monday it was the $276 million decision for a new iron ore export port in WA’s Pilbara region, as well as a major step towards spending at least $1 billion renewing and expanding its big Weipa bauxite mine on Queensland’s Cape York.
Now there’s more than $A860 million to be spent on the Argyle diamond mine in the Kimberley region of WA.
Excluding the emerging Weipa expansion, that’s more than $1.1 billion on the new port and Argyle.
Then there’s around $A700 million in the $A1.7 billion Hope Downs iron ore mine in the Pilbara. Add in Weipa and the total climbs towards $3 billion committed or possible on major projects since the start of September.
The latest money will be spent completing the Argyle underground project.
Argyle is currently an open pit operation and the new development is expected to be operational in 2013 and will extend the life of the mine until at least 2019.
The company said construction activity will ramp up in the first half of 2011, with targeted production rates of nine million tonnes of ore a year forecast within two years.
Argyle is the world’s largest diamond mine by volume, and produces the bulk of the world’s pink diamonds.
Plans to construct an underground mine below the existing open pit operations were made in 2005, but the project stalled during the global financial crisis when diamond prices plummeted.
Rio said yesterday the funding will cover project development and construction of extraction services, crushers, a conveyer and pump stations at the mine in the Kimberley region of north-west WA.
"The extended mine life from the underground project will generate enduring benefits for the Kimberley region, building on Argyle’s significant contribution to economic development over the past quarter of a century," the company said.
"With 70 per cent of the workforce living locally, Argyle is one of the largest contributors to the East Kimberley economy. Indigenous Australians account for one in four members of the local workforce."
"The diamond market continues to recover and long-term industry fundamentals remain healthy," Mr Kenyon-Slaney said in yesterday’s statement.
"A significant supply gap is expected to emerge in the medium to long term and the outlook for demand is strong, driven by the growth of emerging markets.
"Argyle is well positioned to capture the new demand," he said.
Production from Argyle has topped 760 million carats since it began operations in 1985.
Overnight Monday Rio revealed that it had used the maturation of an $A400 million credit facility to increase its stake in Canada’s Ivanhoe Mines Ltd to 34.9%.
Ivanhoe Mines is a Canadian public company which owns 63% of the Australian-listed Ivanhoe Australia Ltd.
Relations between Rio and Ivanhoe’s founder Robert Friedland have become strained as he seeks to find ways to offset Rio’s growing control and influence in the company.
Rio’s move to convert the credit facility to a higher stake increases the pressure on Mr Friedland to come to a deal and halt plans to try and introduce another big shareholder into the company.
"Rio Tinto confirmed today that it has acquired 40,083,206 common shares of Ivanhoe Mines, increasing its ownership by 5.3 per cent to 34.9 per cent of Ivanhoe Mines outstanding common shares," the statement from Rio said.
Rio said if it were to exercise all of its share purchase warrants it would have an interest in Ivanhoe of about 44 %.
The shares were acquired in accordance with the terms of the $US350 million ($A376.28 million) convertible credit facility the mining giant made available to Ivanhoe Mines in 2007 which was fully drawn down by mid-2008 and which matured on Tuesday, Rio said yesterday.
"Rio Tinto has the right at any time to exercise its remaining share purchase warrants into common shares of Ivanhoe," it said.
If Rio chooses, it can also acquire additional Ivanhoe securities so as to maintain its proportional equity interest in Ivanhoe Mines, and in some circumstances has the right to acquire more.
"Depending upon its assessment of Ivanhoe Mines business, prospects and financial condition, the market for Ivanhoe Mines securities, general economic and tax conditions, and other factors, Rio Tinto will consider availing itself of its rights to acquire additional securities of Ivanhoe Mines," Rio said.
Under the terms of the credit facility Rio extended to Ivanhoe, the outstanding principal and accrued interest totalled about $US400.8 million, which was automatically converted into common Ivanhoe shares at a price of $US10.00 ($A10.70) per share.
Rio Tinto and Ivanhoe are joint venture partners in the $US4.6 billion Oyu Tolgoi copper and gold project in Southern Mongolia.
The mine, 66% owned by Ivanhoe, has been described by Rio as the world’s largest untapped copper and gold resource, which could have operations for decades to come.
As well as Oyu Tolgoi, Ivanhoe has a 57% stake in Mongolian coal miner SouthGobi Resources and half of Altynalmas Gold Ltd, which is developing the Kyzyl gold proje
