The mini-boom in the iron ore industry has topped the $9 billion mark after Rio Tinto yesterday revealed it had approved a $US2.6 billion ($3.5 billion) investment in its new Koodaideri iron ore mine in Western Australia’s Pilbara region.
The mine still requires final approvals from the West Australian government. That is expected shortly and construction of the mine’s infrastructure is due to begin next year, with first iron ore production expected in 2021.
The announcement follows one several months ago from BHP which revealed plans to spend $US2.9 billion on its new South Flank mine in the Pilbara. Smaller rival, Fortescue Metals Group is also spending $US1.275 billion on its new Eliwana mine in the Pilbara.
The aim of the three mines is to boost the average iron oxide content of their owners output. For example, Rio’s new mine will have an average ore grade of 61.9% iron oxide which is close to the now standard Pilbara ore quality demanded by the Chinese steel industry.
The mine will be one of Rio Tinto’s most automated operations, featuring robotic trains and advanced analytics as well as 3D reconstructions of the operation to help train new miners in simulated conditions.
The new mine will have an annual capacity of 43 million tonnes – 7.5% higher than initial estimates — and it will underpin the mining giant’s flagship Pilbara blend iron ore by replacing ore from exhausting mines at a higher quality and with more lump in the mix than at the moment (38% against 35%).
Rio said the highly automated mine will be Rio’s lowest-cost contributor to its Pilbara blend.
“Koodaideri is a game-changer for Rio Tinto,” Rio Tinto chief executive Jean- Sebastien Jacques said in a statement on Thursday.
“It will be the most technologically advanced mine we have ever built and sets a new benchmark for the industry in terms of the adoption of automation and the use of data to enhance safety and productivity.”
As well as the mine itself, Rio plans a 166-kilometre rail line, an airport, support facilities and accommodation for employees.
More than 2,000 people will work on the construction, with 600 permanent roles once the mine is operational.
BHP’s South Flank mine will have a similar role Ore from South Flank will replace 80 million tonnes the company currently mines at Yandi each year.
South Flank’s 62%-63% iron product will replace Yandi’s 56%ore, boosting the average grade of BHP ore from the Pilbara by one percentage point to 62%.
First ore from South Flank is targeted for 2021, with the project expected to produce for more than 25 years.
The Koodaideri mine has ore reserves of 598 million tonnes at 61.9% Fe. Rio said the reserves comprise 269 million tonnes of Proved Reserves and 329 of Probable Reserves.
Rio said yesterday the mine’s capacity was initially 40 million tonnes a year but that has been lifted to 43 million. As well the company revealed that it is looking to future expansion to almost double that capacity.
“A $44 million pre-feasibility study into Koodaideri Phase 2 has also been approved. The expansion could increase annual capacity from the Koodaideri production hub to 70 million tonnes and beyond. A final investment decision is subject to study outcomes and Rio Tinto’s value over volume approach,” the company said.
Rio shares rose 1.7% to $73.25 while BHP shares were up 1.2% at $30.98.
