Rio Tinto leans on Rhodes Ridge and Simandou to secure iron ore growth as demand shifts
Rio Tinto is looking to two major iron ore developments — Rhodes Ridge in Western Australia and Simandou in Guinea — to underpin the future of its iron ore business as the global market evolves and emerging economies drive new demand.
Speaking at the Melbourne Mining Club at Melbourne Town Hall, Rio Tinto chief executive iron ore Matthew Holcz said Rhodes Ridge represented a major opportunity for the company, describing it as the “best undeveloped deposit in the Pilbara”.
“It’s more than a deposit; it’s a province,” Holcz said.
The project has entered the pre-feasibility stage, with Rio Tinto investing around $US190 million ($269 million) in studies expected to run until 2029, when the company plans to make an investment decision. First ore is targeted for 2030, with Rhodes Ridge expected to provide the capacity to lift Rio Tinto’s Pilbara production towards 360 million tonnes a year.
The project will also help address one of the industry’s biggest challenges: declining ore grades.
“We’ve seen in the market a lot of the major producers’ grades have been declining year on year,” Holcz said.
“With Rhodes Ridge in the Pilbara, and also we believe we’ve got the best undeveloped deposit outside of Australia in Simandou, the grades there are even higher.”
Rio Tinto’s Simandou project in Guinea is expected to produce about 60 million tonnes a year from the company’s share of the development once operating at full capacity. Holcz said the project represented another major opportunity for the company’s future iron ore portfolio.
The investment in new supply comes despite ongoing debate about the future of iron ore demand, particularly as China’s steel industry matures and the use of scrap steel increases.
Holcz said Rio Tinto remained confident in the long-term outlook for the commodity.
“If we look at the last six years, it feels like every year the demise of iron ore is very much being exaggerated,” he said.
While China is approaching peak steelmaking capacity, Rio Tinto expects Chinese iron ore consumption to remain relatively stable through to 2030, with some decline after that. Growth in emerging markets, particularly India, is expected to offset some of that pressure.
“India is growing at around 5 per cent a year,” Holcz said. “We expect their consumption to double from now to 2040, and expect them to be a net importer by 2035.”
Holcz said the supply side of the market was becoming increasingly challenging, with disruption risks, resource depletion and declining grades creating a need for new projects.
“When we look at the next decade, we believe industry will still need 800 million tonnes,” he said. “The difference is not much of that is due to increasing demand. Most of it is due to depletion.”
He said many major iron ore operations developed during the industry boom between 2005 and 2015 were now reaching a stage where replacement supply was required.
“If we look at when the industry really boomed, 2005, 2010, 2015, a lot of those assets are now 15, 20 years old,” Holcz said, with Rhodes Ridge and Simandou outlined as key enablers to support changing demands and already-established asset depletion.
“Grades are declining, so you need more iron ore units just to stand still in terms of iron content,” Holcz said.
“[Rhodes Ridge] is also an opportunity for us to increase our grades.”
The executive said Rio Tinto’s long-term resource base provided confidence as the company celebrated 60 years of operations in the Pilbara.
“We’ve got a really proud history in the Pilbara,” he said. “Looking forward on those time horizons is a great opportunity we have with our resource base.”