Rio announces massive investment in the Pilbara

Rio Tinto has announced it will invest US$3.7 billion in the Pilbara to expand its iron ore operations.

It is part of the miner's wider $4.2 billion investment to grow its iron projects globally.

According to Rio Tinto chief executive Tom Albanese the company is "directing investment to projects that will generate the most attractive returns for shareholders and are resilient under any probable macroeconomic scenario.

"Our Pilbara iron ore business has one of the highest margins in the industry," Albanese explained.

He went on to say that it "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".

Earlier this year the miner announced a $3.1 billion commitment to expanding its Australian iron ore operations.

The majority of the investment was used to extend the life of its Nammuldi iron ore mine, with the site receiving a $2 billion boost.

A further $1.1 billion was used on early works to expand the company's Cape Lambert port and rail facilities.

Rio is looking at expanding Cape Lambert from 220 to 353 million tonnes a year, with the expansion currently in final feasibility study.

It followed BHP Billiton's approval of nearly $1 billion to construct the outer harbour at nearby Port Hedland.

Rio Tinto Australia chief executive Sam Walsh said in a statement that the expansions came at a time when iron ore demand from Asia was "forecast to grow strongly.

"We continue to see positive prospects for medium- to long-term iron ore demand driven 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 one billion tonnes a year out towards 2030.

"This demand growth is coupled with an increasingly challenged supply response, as several high-profile competitor projects have recently been either delayed or postponed." 

He said the investments at Cape Lambert and Nammuldi were a "significant milestone" in the company's plans to increase its WA iron ore operations by 50%.

Walsh added that it has positioned "Rio 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". 

The miner has also announced a new managing director for its Argyle diamond mine in the Kimberley region of Western Australia.

It has appointed Kim Truter as the new head from 1 July.

Truter is currently the chief of Rio's Diavik diamond mine in Canada.

He said that The Argyle Diamond Mine is an iconic Australian operation and it plays an important role in Rio Tinto’s global diamonds business. I am looking forward to working with the team at such an exciting time in Argyle’s growth and development.”

Despite the new chief and the discovery of a world record pink diamond at Argyle, Rio is reportedly looking to offload its diamond assets.

In March Rio said it had begun a "strategic review" of its business that would include looking for potential buyers for its diamond assets.

The miner said that while the diamond market was still positive the sector was small and big companies were better suited to other sectors.

"The diamonds market outlook is very positive, with demand growing strongly and lack of new discoveries limiting supply," it said.

"We have a valuable, high quality diamonds business, but given its scale we are reviewing whether we can create more value through a different ownership structure."

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