Rio Tinto sees 400m tonne potential from Aussie iron ore mines

30 October 2017

Rio Tinto could look to increase output from its iron ore mines in western Australia to 400m tonnes a year, its chief executive Jean-Sébastien Jacques has told its staff.

In a memo posted on an internal message board last month, Mr Jacques said the potential of Rio’s Pilbara iron ore business business was clear: “it could/should start with a 4 in the medium to long term subject to market conditions.”

To put that figure in perspective, Rio expects to export 330m tonnes of the steel-making material this year and has previously talked about increasing output from the Pilbara to 360m tonnes, although it has never set out a precise timeline.

The comments are significant because they highlight how major mining companies are starting to think about growth again after years of austerity and aggressive cost cutting.

It also shows how the industry, which squandered billions of dollars on over-ambitious projects and deals during the so-called commodities supercycle, is trying to win back the trust of investors.

Since he took the reins in July 2016, Mr Jacques has boosted returns to shareholders, further strengthened the company’s balance sheet and introduced a market-orientated mindset.

He’s said that Rio will always put “value over volume” and not pump out extra tonnes just to take market share.

“We will grow our business in a very focused way,” Mr Jacques says in the memo, describing the Pilabra mines as one of three “clear areas” of investment. “It is about quality and not quantity (value over volume). It is better to deliver few world class projects very well… than pursuing too many average projects.”

The other areas of investment mentioned in the memo are bauxite, copper and gold. Mr Jacques also highlighted Rio Ventures, a new unit that has been set up to find and invest in early stage mining projects.

Rio declined to comment on the memo.

Iron ore is the company’s main source of profits. It was trading at $60.60 a tonne on Thursday.

Source: FT.com