Rio Tinto holds its Australian investor day today and we’ll probably hear more of what the company said at the London briefing on Friday night, our time.
That included confirmation of lots of capital investment in Australia and in other key sectors, but the company made clear iron ore and copper remain the major areas of future interest.
The big message was the company’s expansion of its iron ore reserves in WA’s Pilbara region.
The company said in answer to questions in London that it was looking at a number of possible acquisitions in the “low-single-digit billion” price range, but no mega deals along the lines of the Alcan purchase in 2007 which nearly destroyed the company in the GFC.
Rio said it expects to spend about $US11 billion on building and expanding mines in 2011, up from about $US4 billion.
And annual capital expenditure is likely to remain “at a comparable level” to the $US11 billion level for the next few years.
Rio forecasts 283 million tonnes of iron ore production capacity by 2013, which puts it on course to reach its goal of 333 million tonnes by 2015.
CEO Tom Albanese warned that Rio does see a price reversion in iron ore prices in coming years.
“Anyone who thinks $US100 per tonne is a long-term price is wildly bullish,” he said, as prices continued to hover around $US150 a tonne. (The spot price is currently around $US170 a tonne.)
Rio said it had earmarked more than $US2 billion to invest in copper assets during the next three years.
"As a result of variable grades across the mine lifecycle, 2010 mined copper production is expected to be 661,000 tonnes.
"The effect of lower grades will continue in 2011 but rebound in 2012.
"Beyond 2012, the outlook reflects an increase in annual copper production for 2013 and 2014 as a result of increasing grades and the start of production at Oyu Tolgoi.
"More than US$2 billion is to be invested over the next three years to grow existing copper operating assets.
"Development of the Oyu Tolgoi project remains on track with first ore expected in 2012 with a five year ramp-up to full production."
Rio Tinto’s stake in Ivanhoe now stands at 34.9%.
Since July, Rio has announced $US6 billion of investments in its iron ore assets in the Pilbara, with $4.4 billion committed to so-called growth projects.
The board is expected to make a final investment decision on the expansion next year.
The company’s “port, rail and mine operations have unrivaled potential to grow significantly beyond this level, if required by the market,” Rio said in the statement.
The estimated iron ore resource at the company’s 14 deposits in the Pilbara region has increased by 2 billion tonnes after new drilling work. The deposits now hold an estimated 14.4 billion tonnes of resources, it said.
"This latest work, (drilling, re-interpretation and re-estimation of 14 deposits) has expanded Rio Tinto’s Mineral Resource base in the Pilbara by 2.0 billion tonnes, which will be in addition to the currently reported 14.4 billion tonnes of Mineral Resources (2) and 2.8 billion tonnes of Ore Reserves," the company said in the statement.
Sam Walsh, chief executive, iron ore said the expanded resource base would help underpin Rio Tinto’s development of its Pilbara operations to an annual capacity of 333 million tonnes in 2015, and for decades to follow.
“The ongoing technical and study work carried out by Rio Tinto’s iron ore group has led to further increased confidence in Rio Tinto’s Resource position in the Pilbara,” he said.
“Over the last ten years, we have moved to strengthen our ore reserves and mineral resources, having drilled 3.3 million metres. We plan to drill 3.9 million metres in the next five years – a programme unprecedented in the history of the iron ore business, demonstrating our commitment to sustained development in the Pilbara.”
Rio said "integration and transformation of the aluminium business continues, with a further US$1 billion of sustainable cash improvement targeted by 2014".
Rio shares finished at $84.04 on Friday.
