Rio to invest $9.5bn in African mine

Rio Tinto plans to ramp up spending on iron ore, notably at the giant Simandou project in Africa, but has scaled back its investment in decarbonisation.

The miner has budgeted to spend $US6.2 billion ($A9.5 billion) to cover its share of the Simandou development in Guinea.

First production from the mine is expected in 2025, ramping up over three years to full capacity of 120 million tonnes per year, of which 27mt is Rio's share.

This represents a major increase in global supply and is expected to challenge the market share held by existing producers, including in the Pilbara region, which had total production last year of about 890mt.

In a major investor update today, Rio said its total capital investment would increase from $US7 billion in recent years to around $US10 billion per year from 2024 to 2026.

The largest element will be its spend at Simandou.

Conversely, Rio has scaled back its planned capex on decarbonisation to between $US5 billion and $US6 billion for the period to 2030, with most of this spending in the later years.

It had previously planned to spend about $US7.5 billion over this period.

The company said this reflected several factors, including the use of commercial partnerships outside of capital expenditure, such as renewable power purchase agreements and biofuel contracts.

Rio said it was also aligning the timing of investment in renewables in the Pilbara to beyond 2030 when electrification of its truck fleet was expected.

Chief executive Jakob Stausholm said Rio strongly believed it was well positioned in an opportunity-rich world.

“There has never been greater demand for what we do, from mining to processing, and the work we are doing today is creating a stronger Rio Tinto for years to come,” he said.

While Simandou is Rio’s biggest growth project, the company said it had a clear pathway to lift its Pilbara production to between 345mt and 360mt in the medium term.

This would include building five ‘replacement’ mines with total capacity of 130mtpa, starting with its Western Range mine, currently under construction.

That will be followed by brownfields developments at West Angelas, Hope Downs 1, Nammuldi and Brockman 4, which are all scheduled to come online in 2027 and 2028, subject to gaining relevant approvals.

They will be followed by Rhodes Ridge, with first ore to be produced “this decade”.

At Simandou, Rio is part of the Simfer consortium, led by China’s Chinalco and Baowu, which will account for half the total production.

A second consortium led by Singapore’s Winning International (WCS) is expected to produce the same volumes from its neighbouring tenements.

Rio executive Bold Baatar said the miner was continuing to work closely with the government of Guinea, Chinalco, Baowu and WCS towards full sanction of the project.

“Simandou will deliver a significant new source of high-grade iron ore that will strengthen Rio Tinto’s portfolio for the decarbonisation of the steel industry, along with trans-Guinean rail and port infrastructure that can make a significant contribution to the country’s economic development,” he said.

The project represents the largest greenfield integrated mine and infrastructure investment in Africa, and includes 600 kilometres of new rail together with new port facilities.

Once complete, the co-developed infrastructure and rolling stock will be transferred to and operated by the Compagnie du Transguinéen (CTG) joint venture, in which Simfer and WCS each hold a 42.5 per cent equity stake and the nation of Guinea a 15 per cent equity stake.

The attractions at Simandou include a large deposit of very high-grade iron ore.

The Simfer joint venture’s mine concession held an estimated total mineral resource of 2.8 billion tonnes.

Rio said it was reporting the conversion of an estimated 1.5 billion tonnes to ore reserves that support a mine life of 26 years, with an average grade of 65.3 per cent iron and low impurities.