Rio Tinto's (LON:RIO) Pilbara Expansion Helps Bolster Iron Ore Output
Rio Tinto (LON:RIO) produced record volumes of iron ore in the first half of 2014 thanks in large to the expansion of its mines in the Pilbara region of Western Australia.
The UK miner increased iron ore production by 11 percent, producing 139.5 million tons in the fiscal first half despite weak prices of the metal. Rio Tinto’s shipments rose 20 percent to 142.4 million tons.
"Our iron ore expansion continues to deliver high-margin growth reinforcing our position as a low cost producer," Rio Tinto Chief Executive Sam Walsh said in a stock exchange filing.
“It has allowed us to increase shipments of our Pilbara Blend products, providing our customers with reliable, long-term supply of stable quality.”
Rio’s reliance on the commodity has caused concerns among investors. Iron ore prices have fallen from approximately $135 a ton last year to below $90 a ton last month, and many believe global mining companies are adding new supply too quickly
Miners are betting that Chinese iron ore demand will remain stout. In the first half of 2014 China imported 457 million tons of iron ore, up 19 percent from a year earlier.
BHP Billiton CEO Andrew Mackenzie believes Australia should accommodate China as much as possible, working towards the maximum degree of free trade with the nation’s biggest trading partner.
"I think it's a positive step unquestionably to more intimately tie Australia to the main market for resources going forward," said Mackenzie. "Increased ties between Australia and the rest of Asia can only be good for the health and vibrancy of this economy going forward. A country like Australia can offer them something they don't have, which is resources."
With more than 90 percent of its profits coming from iron ore, Rio Tinto believes its Pilbara mines will continue to advantageous even at lower prices, with high-cost mines in China most at risk of sustained downturn.
Vale invests $150mn to extend life of Manitoba operations
Vale has announced a $150mn CAD investment to extend current mining activities in Thompson, Manitoba by 10 years while aggressive exploration drilling of known orebodies holds the promise of mining well past 2040.
Global energy transition is boosting the market for nickel
The Thompson Mine Expansion is a two-phase project. The announcement represents Phase 1 and includes critical infrastructure such as new ventilation raises and fans, increased backfill capacity and additional power distribution. The changes are forecast to improve current production by 30%.
“This is the largest single investment we have made in our Thompson operations in the past two decades,” said Mark Travers, Executive Vice-President for Base Metals with Vale. “It is significant news for our employees, for the Thompson community and for the Province of Manitoba.
“The global movement to electric vehicles, renewable energies and carbon reduction has shone a welcome spotlight on nickel – positioning the metal we mine as a key contributor to a greener future and boosting world demand. We are proud that Thompson can be part of that future and part of the low carbon solution.”
Vale continues drilling program at Manitoba
Coupled with today’s announcement, Vale is continuing an extensive drilling program to further define known orebodies and search for new mineralization.
“This $150mn investment is just one part of our ambitious Thompson turnaround story. It is an indicator of our confidence in a long future for the Thompson operations,” added Dino Otranto, Chief Operating Officer for Vale’s North Atlantic Base Metals operations.
“Active collaboration between our design team, technical services, USW Local 6166, and our entire Thompson workforce has delivered a safe, efficient and fit-for-purpose plan that will enable us to extract the Thompson nickel resources for many years to come.”
The Thompson orebody was first discovered in 1956 by Vale (then known as Inco) following the adoption of new exploration technology and the largest exploration program to-date in the company’s history. Mining of the Thompson orebody began in 1961.
“We see the lighting of a path forward to a sustainable and prosperous future for Vale Base Metals in Manitoba,” said Gary Annett, General Manager of Vale’s Manitoba Operations.