GLOBAL miner Rio Tinto approved a $3.1bn (£1.9bn) iron ore expansion yesterday, staking a claim to become the world’s top producer and defying industry concerns over a new Australian mining tax.
Iron ore miners are ramping up production to meet booming demand from Asia, with most of the growth in output set to come from Australia where two of the world’s biggest producers – Rio Tinto and BHP Billiton – dominate.
Rio Tinto’s move to boost output by 28 per cent follows this week’s demise of a planned joint venture with BHP Billiton in northwest Australia’s Pilbara region aimed at saving the companies $10bn in costs.
“Rio and BHP are obviously not taking much notice of the mining tax if they are planning all these investments in iron ore,” said a source.
“BHP Billiton unveiled a six per cent rise in quarterly iron ore output today [Wednesday] and is also planning to expand its Australian iron ore operations to meet booming Asian demand.”
Rio Tinto’s announcement, combined with BHP Billiton’s production surge, eclipsed news reports yesterday that suggested they and other miners risked being double-taxed under Australia’s proposed 30 per cent tax on iron ore and coal.
Rio Tinto, BHP Billiton and London-listed Xstrata – the big three of Australian iron ore and coal – accuse Canberra of reneging on a guarantee to refund all of the money the miners pay state governments in the form of royalties, newspapers said. Without that guarantee, they could effectively be double-taxed.
But neither industry analysts nor political experts believe the issue will reignite the tax issue and hurt mining investment, and pointed to Rio Tinto’s expansion plan as evidence.
Rio Tinto’s $3.1bn plan would take its annual Australian production to 283m tonnes a year in 2013 from 220m tonnes. It plans to boost it further to 333m tonnes, which could bring it alongside Brazil’s Vale now the world’s top producer.
BHP Billiton is running at around 125m tonnes a year, with near-term plans to take that to 155m tonnes.
BHP Billiton, the world’s biggest miner said it was now running most of its assets at full capacity as suppliers struggle to keep pace with the global appetite for industrial raw materials.
Meanwhile, miner Xstrata said yesterday it would invest a further $710m to boost its production in South Africa. Under the expansion project, a new smelter will be built with a capacity of 360,000 tonnes per year, boosting the group’s overall ferrochrome capacity to over 2.3m tonnes. The project is due to reduce overall costs of ferrochrome production by around six per cent, Xstrata said. Ferrochrome is a key component in stainless steel.