Rio Tinto banks its iron ore hopes on Simandou, Rhodes Ridge
Simandou and Rhodes Ridge are Rio’s iron ore future but lower grade SP10 exports will last longer as a result.
Rio Tinto’s iron ore future sits in the hands of two multibillion-dollar megaprojects in Africa and the Pilbara as the company looks to simplify its development pipeline and fix its growing reliance on lower grade ore sales from its flagship division.
The mining giant has quietly pushed off plans for a costly 27 million tonne a year expansion of its new Gudai-Darri mine in the Pilbara in favour of smaller brownfield mine expansions, and banked its Pilbara plans on the accelerated development of the giant Rhodes Ridge deposit, long-touted as the best undeveloped iron ore prospect in Australia.
Rio iron ore boss Simon Trott told reporters on Wednesday that Rio’s share of the under-construction Simandou project in Guinea and the giant Rhodes Ridge iron ore project in the Pilbara – a joint venture between Rio and Wright Prospecting – would underpin its iron ore division from the end of the decade.
But until Rhodes Ridge is built Rio has flagged an increasing reliance on the export of lower grade iron ore from the Pilbara to bulk out its sales, as its newly built Gudai-Darri mine fails to deliver the improvement in the quality of exports the company had hoped.
Rio’s September quarter production report, released on Tuesday, showed a sharp fall in shipments of its flagship Pilbara Blend product, which underpins baseload crude steel production across major Chinese steel mills.
September quarter exports of Pilbara Blend fines were more than 20 per cent lower – or 7.8 million tonnes – lower than the same time in 2022, despite 1 million tonne improvement in overall export rates.
The difference was largely made up with an increase in exports of the lower-grade SP10 iron ore products. In a significant reversal of previous forecasts, Rio is now saying its SP10 exports are likely to make up a significant portion of its total exports until Rhodes Ridge enters production towards the end of the decade.
Only a year ago Mr Trott told analysts the entry of Gudai-Darri into production would help restore Rio’s Pilbara Blend export levels and reduce sales of SP10 to the “bottom end” of a 6 to 12 per cent range of Rio’s total Pilbara exports.
The company now says it expects SP10 – which grades 58 to 60 per cent iron ore, below the 62 per cent average of benchmark export quality ore – to make up 13 to 15 per cent of its total exports until Rhodes Ridge enters production and restores the Pilbara Blend to levels of better than 85 per cent of its total shipment volumes.
Mr Trott told reporters the need to work more carefully around heritage sites important to traditional owners was a major factor in the increase in SP10 exports as it cost the company’s mining operations access to higher-grade iron ore needed to keep the Pilbara Blend consistent across both grade and impurity levels. “We obviously blend from all our different mines. If we lose access to an area, particularly an area that‘s perhaps higher grade, that means that the other material that we can blend in isn’t as great – so it’s expressed as SP10,” he said. Rio’s care around Indigenous heritage areas was sparked by the Juukan Gorge debacle, and recently sharpened over concerns blasting at the company’s Nammuldi mine may have damaged another significant site in September.
Post-Juukan changes to site management at Gudai-Darri have also changed its mine plan, with new areas ruled out of bounds for mining and blasting – leading to an increase in SP10 production levels at the mine to about 12 per cent of its total output.
In analyst presentations this month, Mr Trott also outlined a significant change in Rio’s thinking about its near-term Pilbara future, saying the company had cut a number of smaller iron ore mines from its plans in favour of focusing on planning at its under-construction Western Range development – a joint venture with China’s Baowu – and the massive Rhodes Ridge project.
Rather than duplicate processing infrastructure at Gudai-Darri, for example, Rio will instead spend about $US70m ($130m) on minor improvements to its operations – including new trucks and other machinery – to push its annual output up 70 million tonnes a year to 50 million tonnes.
“As we get into Rhodes Ridge, the grades in Rhodes Ridge are phenomenal. I probably wish we‘re in it today. When you look around that compared to I guess industry average is really well positioned or body. You look at that in 10 years time, and it’s going to position our business extremely well.,” he said.
Rhodes Ridge was discovered by the legendary prospecting partnership of Lang Hancock and Peter Wright, but the project spent decades in limbo amid a bitter legal dispute between Wright Prospecting and Gina Rinehart’s Hancock Prospecting. Rio finalised negotiations with Wright Prospecting over the project’s development a year ago and is now pushing to rush the mine into development.
The reporter is travelling to the Pilbara as a guest of Rio Tinto.