Rio Tinto update on production of iron ore

Wednesday, 30 Nov 2011

As industry pricing mechanisms continue to change, Rio Tinto's iron ore sales portfolio has evolved to a balance of spot, monthly and quarterly price mechanisms during the fourth quarter of 2011.

Rio Tinto continues to see an attractive long-term demand picture for iron ore, with Chinese steel production per capita not forecast to peak until circa 2030 at 750kg per capita (500kg per capita today). Other growth economies such as India should still be on an upward demand trajectory at this point.

In the medium term, Rio Tinto forecasts that industry supply will need to increase by 100 million tonnes per year for each of the next eight years to meet demand growth and replace high cost supply. Rio Tinto expects to supply around 25% of this industry growth.

Rio Tinto's Pilbara expansion remains on time and on budget (AUD basis). There are options to increase capacity further from 353 million tonne per annum to 453 million tonne per annum. Capital intensity of expansion from 220 million tonne per annum to 353 million tonne per annum is expected to be around mid USD 150 per tonne on a 100 per cent basis (Rio Tinto share around mid USD 130 per tonne). Expansion beyond 283 million tonne per annum is subject to Board approval.

The development of Simandou is progressing as planned, with the early works already underway. Rio Tinto is adopting a phased approach to constructing the infrastructure to ensure delivery of first commercial production by mid 2015. Rio Tinto recently approved a further USD 211 million in study funding and USD 1.1 billion of early commitments for the next stage of the project.