3rd Sep 2015 06:42
LONDON (Alliance News) - Rio Tinto PLC on Thursday outlined the next phase of its plans to capitalise on the iron ore market "through a relentless focus on productivity and efficiency, technology, and people development" to drive down costs at its flagship Pilbara iron ore mine in Australia.
"Rio Tinto has demonstrated how the completion of its world-class iron ore expansion project in Western Australia will deliver significant shareholder value as the sector transitions through the ongoing volatility in global commodity markets," it said in a statement.
The FTSE 100-listed miner believes, despite a slowdown in China and considerably lower iron ore prices compared to a year ago, that steel demand across China and the rest of the world will grow at an average of 2.5% per year over the next 15 years.
Iron ore is a key component in the production of steel, which is mainly used in construction.
"This rigorous analysis confirms that Chinese crude steel production is expected to reach around 1.0 billion tonnes by 2030," said the miner.
Away from China, Rio Tinto sees opportunities in other emerging markets and said non-Chinese steel demand is expected to increase by 65% by 2030.
That push in global steel demand will result in global iron ore demand rising to around 3.0 billion tonnes per year by 2030, and Rio Tinto said around 120.0 million tonnes of marginal iron ore production will exit the market in 2015 with a further 45.0 million tonnes "at risk" of exiting, meaning there will be less iron ore supply in the market by the end of 2015 than there was at the start.
Rio Tinto Technology and Innovation Chief Executive Greg Lilleyman said the company will save around USD200 million a year over the next three years through productivity gains at Pilbara.
"We have spent the past decade building the best iron ore business in the world - a project that has come in on time and below initial cost estimates. We intend to optimise these new assets to deliver maximum value for shareholders and stakeholders as markets transition," added Group Chief Executive Andrew Harding.
Rio Tinto has spent a total of USD14.70 billion in developing the Pilbara mine and the related infrastructure, and it has managed to lower operating costs at the mine by almost USD1.0 billion per year since 2012.
In the first half of 2015, the mine had a cash cost of USD16.20 per tonne of ore, compared to USD20.40 per tonne a year earlier, and the company said this has fallen further to around USD15.20 per tonne since the end of the first half.
The miner is also "consistently" achieving a higher iron ore price than all of the other producers operating in the Pilbara area using "the most recognised brand in the global steel industry", significant when iron ore prices are suffering.
By Joshua Warner; [email protected]; @JoshAlliance
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