Rio Tinto on track for $2.6 billion Gudai-Darri ramp up
The $2.6 billion Gudai-Darri replacement iron ore mine in Western Australia is progressing with production ramp-up on track for early 2022, according to Rio Tinto's Annual Report 2020.
The first phase of Gudai-Darri will have a 43Mt annual capacity, underpinning production of the Pilbara Blend.
Amid rising scrutiny on low-carbon operations and sustainability, work will begin on a 34MW solar plant, comprising around 100,000 solar panels, this year. The plant is expected to supply all of Gudai-Darri’s electricity demand during peak solar power generation times and approximately 65% of the mine’s average electricity demand.
Set to be one of the world’s most automated mines, Gudai-Darri’s autonomous fleet will include the world’s first autonomous water carts, to be launched in 2021. Delivered through a partnership with Caterpillar, the water carts will join its autonomous heavy mobile equipment fleet including haul trucks and autonomous drills.
The focus on sustainability is also designed to alleviate pressure on the company following the destruction of the rock shelters at Juukan Gorge, in which Rio Tinto acknowledged it must do better and its employee pride had been eroded. It has earmarked $50 million to attract, retain and support indigenous employees across Australia. The Yandicoogina mine, Pilbara, is pictured.
Product-specific results were as follows:
· Iron Ore $27.5 billion gross sales, $18.8 billion underlying EBITDA
· Aluminium $9.3 billion gross sales, $2.2 billion underlying EBITDA
· Copper & Diamonds $5.4 billion gross sales, $2.2 billion underlying EBITDA
· Energy & Minerals $5 billion gross sales, $1.6 billion underlying EBITDA
Three criteria need to be met in order for the Oyu Tolgoi copper project can start this year; chiefly outstanding government approvals, funding as agreed with Turquoise Hill Resources (TRQ) in an MoU in September 2020, and achieving power milestones agreed with the Government of Mongolia in June 2020.
On January 4, the government advised Rio Tinto that they were "dissatisfied with the results of the definitive estimate and the funding implications for the sharing of economic benefits between the shareholders of Oyu Tolgoi".
The report detailed a £7.2 million payment to ousted Chief Executive Jean-Sebastien Jacques last year, and eligibility for future share bonuses, which are worth up to £28 million at current prices.
Chairman Simon Thompson said Jakob Stausholm inherits a company "that urgently needs to restore trust with host communities and in our management of cultural heritage".
Gender diversity is another key focus in 2021 with women comprising only about 20% of Rio Tinto's workforce.
Capex rose 13% to $6.2 billion and the company ended 2020 with net debt of $0.7 billion. To read more on last week's results, click here.
Low carbon world needs $1.7trn in mining investment
According to a new report from consultancy Wood Mackenzie, mining companies need to invest nearly $1.7trn in the next 15 years to help supply enough copper, cobalt, nickel and other metals needed for the shift to a low carbon world.
Cutting carbon emissions
The United States, Britain, Japan, Canada and others raised their targets on cutting carbon emissions to halt global warming at a summit in April hosted by US President Joe Biden.
Meeting those targets will need large-scale deployment of electric vehicles, storage for power generated from renewables and electricity transmission, all of which require industrial materials, such as lightweight aluminium and metals used in batteries such as cobalt and lithium.
Wood Mackenzie analyst Julian Kettle calculated miners needed to invest about $1.7trn during the next 15 years to “deliver a two-degree pathway - where the rise in global temperatures since pre-industrial times is limited to 2°C”.
“At an industry level, there seems to be reticence around investing sufficient capital to develop future supply at the pace and scale demanded by the energy transition (ET),” he said.
Mining firms are wary of making heavy investments after their experience of the last decade when they invested in new capacity just as demand peaked, leading to a collapse in prices and revenues. They also need to please investors, who are unlikely to want to see dividends diverted to capital spending.
Rising demands of investors related environment, social and governance (ESG) issues further add to the challenge.
Australia, Canada and Western Europe carry a low ESG risk but some of the best resources are in high-risk areas, such as Democratic Republic of Congo, which sits on about half the world’s cobalt reserves according to the U.S. Geological Survey. “Given the need to meet tough decarbonisation and ESG targets, Western governments, lenders, investors and consumers will need to get comfortable operating in jurisdictions where ESG issues are more complex,” Kettle said.
Kettle said government support was needed to help miners comply with ESG issues to ensure production from high-risk areas was conducted in an acceptable way to consumers.
“Then, and only then, will the West be able to secure sufficient volumes of the raw materials needed to pursue the energy transition in the timescales envisaged.”