Rio Tinto outlines next generation of mines as iron ore gets back on track

The mining giant has finally put its giant Rhodes Ridge deposit on the development horizon following decades of legal battles.

Rio Tinto has taken a major step towards future proofing its Pilbara operations, according to iron ore boss Simon Trott, after the company finally promoted the long-stalled development of its Rhodes Ridge deposit towards the top of its pipeline.

The rich deposit is one of the suite of Pilbara iron ore projects discovered by the legendary prospecting partnership of Lang Hancock and Peter Wright, and has long been regarded as the best undeveloped iron ore deposit in the Pilbara.

But the development of Rhodes Ridge spend decades in limbo, with Rio standing on the sidelines as the descendants of the two men – through Gina Rinehart’s Hancock Prospecting and Wright Prospect – battled for control of the other half of the deposit.

Outside of Guinea’s Simandou and Vale’s Brazilian iron ore mines, Rhodes Ridge contains vast quantities of some of the highest grade iron ore in the world.

Together with Rio’s involvement in Simandou, the decision this week to accelerate development of the mine – along with joint venture partner Wright Prospecting – offers the opportunity to transform Rio’s iron ore business to export a far higher average grade of iron ore within a decade, Mr Trott told The Australian.

“We’ll be able to transform the business over the coming decades, and it becomes a really big part of our production,” he said.

Rio has previously said its share of Simandou contains about 2.7 billion tonnes of ore at an average grade of 65.5 per cent iron. Rhodes Ridge contains 5.8 billion tonnes at 62.3 per cent iron – and a high grade zone of around 500 million tonnes grading close to 64 per cent iron, Mr Trott said.

By contrast, Rio’s newly approved Western Range mine – a joint venture with China’s Baowu – has resources of 232 million tonnes at 61.2 per cent iron.

“Rhodes Ridge is exactly the sort of material that the market is increasingly wanting and, as you look forward, is going to want in the future,” Mr Trott said.

“If this was in a new province somewhere else in the world, it would be getting developed in its own right as well. So it’s amazing that we’ve got it in the Pilbara.”

Rio Tinto iron ore chief Simon Trott at the Rhodes Ridge iron ore deposit in WA's Pilbara region. Picture: Supplied

Rio initially plans only a 40 million tonne mine at Rhodes Ridge, hoping to be in production by the end of the decade. But Mr Trott said the size of the extended deposit, spread out over a 60 km diameter not far from Newman, could eventually sustain multiple mining hubs and make up the backbone of its Pilbara exports.

“We probably envisage a couple of big hubs out there over time, and it’ll grow as a proportion of our production into the future. But with 6 billion tonnes of high grade ore, we will be pushing really hard to bring other parts of that resource into production,” Mr Trott said.

Mr Trott said the decision to bring Rhodes Ridge into Rio’s schedule was enabled by the finalisation of a new joint venture deal with Wright Prospecting, replacing an original agreement signed in 1972.

“We could not have progressed the development with the agreements that we had, it’s as simple as that – we potentially would have had to build new ports, new rail, the whole bit,” he said.

But, while the new agreement with Wright puts the finishing touches on Rio’s joint venture plans, for decades Rhodes Ridge was lost in the legal wilderness as Wright Prospecting and Hancock Prospecting battled for ownership of the other half of the deposit.

For many years Rio’s joint venture was held with both companies, but in 1997 the descendants of Mr Wright launched legal action, claiming the full half-share of the deposit should have been assigned to them rather being split with Mrs Rinehart’s family company.

That bitter dispute was fought out in the courts for more than 17 years until the High Court finally extinguished Hancock’s claim to a share of Rhodes Ridge.

The legal battles continued beyond that point, however, with Wright launching action against Rio in 2020 over claims the mining giant pegged a group of neighbouring tenements – which also border Rio’s existing rail infrastructure – without giving them the option to participate.

That dispute was settled in 2021, and cleared another important hurdle allowing the mine’s development.

The decision on Rhodes Ridge comes as Rio lifted its iron ore output in the September quarter, despite the impact of a significant derailment.

Rio’s Pilbara operations shipped 82.9 million tonnes of iron ore in the quarter, up 4 per cent on the June period. But Rio said the impact of the derailment on the line from its new Gudai-Darri mine meant its full year exports would come in towards the bottom end of its 320 to 335 million tonne range.

Despite two significant rail outages in the quarter, including the Gudai-Darri derailment, the mining giant said its Pilbara operations were showing some “encouraging performance trends” with Gudai-Darri still on track to hit its full run rate by 2023.

With Gudai-Darri entering the system, Rio’s shipments of low grade ore also fell sharply, lifting the overall value of the company’s exports.

But Rio warned of choppy waters ahead for its global mining business, amid growing fears of a recession in Europe and the US, and as China’s debt laden property sector weighs on growth.

“China’s economy has been challenged by ongoing Covid-lockdowns, power shortages in summer, and continued weakness in the property market. Even as the government maintains a dynamic zero-Covid policy, it has increased policy support to help relieve industries and restore confidence,” Rio said.

“The recovery has been uneven across sectors, with the policy-induced acceleration in infrastructure spending, car sales and exports providing key drivers of growth during the quarter. However, slowing global demand poses downside risks to China’s strong exports, while consumers remain cautious of the property market.”

Iron ore is trading around 12 months lows of just above $US93 a tonne as demand falls in China. Picture: Ian Waldie/Bloomberg via Getty Images

Iron ore is trading around 12 months lows of just above $US93 a tonne as demand falls in China, and Rio said prices for its other major commodities dropped sharply in the September quarter.

RBC Capital markets analyst Kaan Peker said Rio’s iron ore output was in line with expectations, but its overall quarter was weaker than expected due to lower alumina and copper production.

Rio lifted its expected copper costs for the year, and reduced its guidance for the production of refined copper as the mining giant approaches a major rebuild of the smelter and refinery at its Kennecott operations in the US.

While aluminium output was 4 per cent up on the June quarter, at 759,000 tonnes, as Rio’s Kitimat smelter ramped up, the company warned its Boyne smelter in Queensland faced a difficult period due to rising coal costs.

“However, Rio has flagged another concern with Kitimat, with the alumina conveyor system causing disruptions through the quarter slowing the rate of pot restarts,” Mr Peker said in a client note.

Rio shares closed fractionally higher at $94.27 in a sharply higher market.

Originally published as Rio Tinto outlines next generation of mines as iron ore gets back on track