Rio’s new Koodaideri project would feature the latest in automation. Image: Rio Tinto
RIO Tinto’s Iron Ore business has a big year ahead of it, as construction at Koodaideri begins, and the benefits start to roll in from a rising iron ore price; an outcome of Vale’s recent dam disaster.
For Rio Tinto, its principal focus for the near-term was development of its $3.5 billion Koodaideri project, a replacement for depleting capacity across its Pilbara operations.
Koodaideri – approved by the board late November – will be Rio’s most technologically advanced mine to date featuring a digital replica of the processing plant accessible in real time, fully integrated mine automation and simulation systems, and much more.
The 43 million tonnes per annum mine would involve construction of a new processing plant and associated infrastructure, and a 166km rail line connecting to the existing network, with first production slated to begin in 2021.
At a recent WA Mining Club lunch, Rio Tinto Iron Ore chief executive Chris Salisbury described Koodaideri as “a truly tier one asset”.
“Koodaideri will have all our assets networked together and be capable of making decisions themselves – in microseconds,” Mr Salisbury said.
“It will bring together everything we’ve learned from our decade-old Mine of the Future program, along with a lot of new technology.”
Mr Salisbury said the digital twin aspect of the plant would enable the team to create a mine simulation and quickly test a range of different scenarios, without safety risks or downtime.
“We hope to further improve safety as well: employees won’t be required in the pit, because most activities will be automated,” he said.
“In fact, our complete logistics chain is being revolutionised through automation.
“We are advancing towards a networked future where machines can talk to machines, reducing variability through the system.
“We’re pretty excited – and as you can tell I’m pretty excited personally.”
To make matters even more exciting for Rio, a $44 million pre-feasibility study into a Koodaideri Phase 2 had also been approved, which could increase the project’s annual capacity up to 70 million tonnes (and beyond).
The company said a final investment decision would be subject to study outcomes and would need to fit in with its “value over volume” approach.
Overcoming Challenges
Mr Salisbury said the key to any new development deployed across its operations, however, was its people.
“Today Rio Tinto hires many data scientists, mechatronic engineers and software engineers – as well as of course traditional mining engineers,” he said.
“Why? Well, we run the world’s largest robot, a 2.4 km long train in the Pilbara reaching more than 1 million kilometres travelled in full autonomous mode.”
In December, the AutoHaul rail network was successfully deployed in the Pilbara, six months after its first journey.
Rio Tinto Iron Ore Rail, Port and Core Services managing director Ivan Vella said it had been challenging to automate an entire rail network of this size in a remote location, but early results indicated significant potential to improve productivity, increase system flexibility and reduce bottlenecks.
Rio also hosed down any talk of redundancies, assuring the company wouldn’t let any people go in 2019 as a result of the deployment of AutoHaul.
However, for many in existing positions, an automated mine and rail network would mean retraining and shifting from one role to another, Mr Salisbury said.
“A truck driver from the Pilbara now monitors a fleet of autonomous trucks from the Operations Centre; and a fitter now flies a drone to inspect an operating excavator,” he said.
“As you can imagine, at an individual level, this takes considerable learning and re-training.
“Even if the fitter remains a fitter, they are likely to be reaching for a tablet as often as a spanner.
“At a business and indeed, at the resources sector level, an overall shift in core competencies is required.”
He said Rio was investing a lot into its people so they kept abreast of the knowledge curve.
“As one example, we recently partnered with the WA Government and the South Metropolitan TAFE to pioneer a new vocational curriculum on robotics, data analytics and digital techniques,” Mr Salisbury said.
“Our friends across the industry are also supporting this initiative, which is great.
“So all in all, I would say the industry isn’t perfect. We’ve made mistakes, and we’ve learned from those.
“But we are trying – Rio is trying – in every way, to do the right thing.”
Local Procurement
Employing local people and businesses was one example of Rio’s efforts to do the right thing and give back to the communities in which it operates.
“We know our responsibility goes beyond the good times, beyond the mine gate to a lasting, sustained commitment that helps improve the skills and capacity of the local workforce – and has a direct and positive impact on the financial and environmental wellbeing of every community we serve,” Mr Salisbury said.
On 25 January, the miner announced it awarded its 100th work package to local Pilbara businesses, as part of its program to increase opportunities for WA people.
The program, launched back in 2017, included an online local procurement portal that highlighted upcoming work.
Rio Tinto Iron Ore Pilbara Mines managing director Stefan Buys said the portal
“was gaining momentum” and had received more than 3000 expressions of interest from suppliers to date.
Indigenous-owned civil and concrete construction company, Baru Group, was one of the most recent local companies to land work through the platform.
The business was awarded a contract to upgrade the stackers and conveyors at Rio Tinto’s Brockman 2 operation, which included a structural upgrade to the slacker rail sleepers and conveyor foundations, as well as earthworks.
“Winning this work has a flow on effect for our employees and their families,” Baru Group director Anne Tallon said.
“Rio Tinto’s local procurement portal shows us what jobs are coming up and provides us with enough information so that we can do our own investigation into whether we can be cost competitive as well as if the scope of works are within our capabilities.
“Being successful in these opportunities means that our businesses can grow, our employees and their families can live in the towns they chose to live in, and our communities can thrive.”
2019 Guidance
A surging iron ore price was also expected to bode well for Rio Tinto through 2019.
As a consequence of a fatal dam disaster in January, Brazilian miner Vale was suspending up to 40 million tonnes of production at its Feijao mine, and an additional 30mtpa capacity while safety checks were completed at one of its other operations.
While tragic, the disaster had seen a significant lift in the benchmark 62 per cent iron ore price, which had risen above $US90 per tonne, the first time in almost two years.
Some analysts were of the view this could potentially tip over the $US100/t mark amid the supply disruption, however others believed this would soon settle down to a lower level.
Over the last few weeks, Rio’s stock price reflected market movements, climbing from $79.60 a share on 24 January to more than $93 per share at the time of print, a multi-year high.
Fortescue Metals Group and BHP have benefited too, with their respective share prices on an upward swing, which would deliver a significant boost to revenue over the next quarters.
In 2018, average pricing received for Rio’s ore was $57.6 per wet metric tonne on an FOB basis (equivalent to $62.5 per dry metric tonne), a slight decrease from 2017 levels.
While it was unknown how impactful rising prices will be on its average pricing for this year, Rio Tinto had released its production guidance for the year, which was expected to sit between 338 million tonnes and 350 million tonnes, subject to weather and market conditions.
