IN a move that will have far-reaching benefits for the wider Pilbara region, Rio Tinto has announced that it will take the next step in its phased investment
program by committing US$3.7 billion to the development of its Cape Lambert iron ore port – an integral part of its tier one Pilbara iron ore business.
Announcing the funding decision in mid-June, Rio Tinto chief executive officer Tom Albanese said the company was choosing to direct its investment toward
projects that would generate the most attractive returns and would be resilient under any probable macroeconomic scenario.
“Our superior Pilbara iron ore business has one of the highest margins in the industry, low capital intensity of investment and a strong track record of completing projects on time and budget,” he said.
“[The project approval] is in line with our long-held strategy of investing in and operating long-life, low-cost, tier one assets, and consistent with our view of the economic outlook.
“We are mindful of short-term uncertainties, and remain fully committed to a balanced approach to investment, while maintaining a single A credit rating and a progressive dividend policy.”
Since iron ore was first produced at its Mt Tom Price operation in 1966, Rio Tinto Iron Ore has had a proud and successful history of mining in WA’s Pilbara region.
More than 40 years later, the company has developed a network of 14 mines, three shipping terminals and a 1400km freight rail network – the biggest privately owned freight rail network in Australia.
Rio Tinto is now in the midst of an exciting phase of expansion and growth, investing more than US$15 billion in its Pilbara operations in the lead up to 2015.
The expansion will take place in two major stages: increasing production capacity to 283 million tonnes per annum in 2013, followed by a further increase to 333mtpa by 2015. The total increase, of more than 50 per cent on the operations’ current capacity, represents the largest integrated mining project in Australian history.
Rio Tinto’s Dampier and Cape Lambert port facilities will be upgraded to cope with the increased production capacity. Dampier, 12km from Karratha, has two ship loading terminals – at Parker Point and East Intercourse Island – each with facilities for train unloading, product stockpiling and blending, and ship loading. In September 2010, Rio Tinto announced an investment of US$230 million for a second incremental expansion of Dampier port, to take its total
system capacity to 230mtpa.
Opened in 1972, the port at Cape Lambert is the key to Rio Tinto’s expansion targets: at 3km long and 30m high, the wharf at Cape Lambert is one of the highest, longest and deepest wharves in Australia. The port has an annual capacity of 80 million tonnes; to achieve its overall throughput target by 2015, Rio Tinto has reported that it will expand Cape Lambert to handle an additional 100mtpa. Upgrades to the port will include the addition of a new 1.8km jetty and a four-berth wharf that will run parallel to the existing wharf.
Sinclair Knight Merz (SKM) was appointed as the engineering, procurement and construction management contractor for the expansion of the Cape Lambert port facility. The contractor’s work will include the delivery of a new iron ore port facility, Cape Lambert Port B, which will sit alongside the existing Cape Lambert port. The expansion provides for an initial shipping capacity of 53mtpa, but the port’s design will allow for a further increase of 50mtpa in the future. The development will include a tandem car dumper facility, stockyard, screenhouse and surge bin facility, a 1.4km access jetty, and a double-sided iron ore wharf with two shipping berths and a shiploader.
SKM will be responsible for delivering power distribution, control systems and associated infrastructure, including buildings, fuel and water supplies, and
the accommodation village expansion.
John Holland Group was awarded a $276 million contract for the construction of a new 920m jetty and 420m two-berth shiploading wharf, scheduled for completion by late 2012. A joint venture between Abigroup and Geraldton Line Haul was awarded two contracts for works at Cape Lambert – the first for quarrying, wharf abutment and tug harbour construction and the second for rail formation earthworks.
In addition to its port expansion plans, Rio Tinto announced in late 2011 that it would also invest US$310 million in a coastal water project for the Pilbara,
to ensure a sustainable water supply for all of its iron ore operations and its multi-pronged expansion plans. The coastal water supply project involves the
construction of a new borefield and pipeline system, with completion to coincide with the planned production capacity increaseto 283mtpa in 2013. Rio Tinto will build, own, and operate the borefield – in the lower Bungaroo Valley, south east of Pannawonica – which will have an annual capacity of 10 gigalitres.
When announcing its investment decision on June 20, Rio Tinto reported that two of three key stages in its Pilbara expansion were complete – the de-bottlenecking of Dampier port to achieve 225mtpa by the first quarter of 2011 and an incremental increase in Dampier port’s capacity to achieve 230mtpa by end of the first quarter of 2012. The company reported that Cape Lambert’s incremental increase to 53mtpa, to achieve 283mtpa by the fourth quarter
of 2013, had been implemented; it reported that infrastructure approval had been granted for Cape Lambert’s subsequent 50mtpa incremental increase, to achieve 353mtpa in the first half of 2015. WA Premier Colin Barnett welcomed Rio’s announcement of its expansion funding and said the State Government
had already conditionally approved the port’s expansion before the company’s board made its final investment decision.
“Investment on this scale in key port infrastructure is excellent news for the Pilbara and for Western Australia,” Mr Barnett said.
“It underlines the increasingly significant role that expanded iron ore production and a dynamic Pilbara are having in shaping the economic and social future of our state.”
Rio Tinto Iron Ore chief executive Sam Walsh said Rio Tinto continued to see positive prospects for medium to long-term iron ore demand, driven largely by ongoing growth in Chinese consumption.
“We continue to forecast that annual Chinese steel production will grow from its current level of around 700 million tonnes to around 1 billion tonnes a year out towards 2030,” Mr Walsh said.
“This demand growth is coupled with an increasingly challenged supply response, as several high-profile competitor projects have recently been either delayed or postponed.
“Our Pilbara expansion is already well underway, positioning us to capture the opportunities of this market environment.
And we have the natural advantages of a readily-expandable Rio Tinto-operated port and proximity to the Chinese market.”