Rio Tinto to spend $500m on studies, drilling, to get Rhodes Ridge into shape

Rhodes Ridge has long been regarded as Australia’s best undeveloped iron ore project, and now Rio Tinto will be spending $500m to turn its promise into reality.

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

Rio Tinto says it will pump more than $500m into accelerating the development of its giant Rhodes Ridge iron ore project in the Pilbara, as the company finds a path to a 100 million tonne a year hub which will finally end the mining giant’s reliance on a scattered network of smaller Pilbara mines.

Rio said on Tuesday it expects a newly launched pre-feasibility study on Rhodes Ridge to report results by the end of 2025, as the company launches a drilling campaign at the project to turn its already massive mineral resource into discrete deposits where the company can unleash its mining engineers.

Rio will spend about $400m drilling out around 1.2 million metres of shallow holes across Rhodes Ridge as it looks to improve its confidence in the deposits, which sit across a project area 60km long and 30km from north to south.

Rio Tinto iron ore chief executive Simon Trott: “Longer term, the resource could support a world-class mining hub with a potential capacity of more than 100 million tonnes of high-quality iron ore a year”. Picture: Supplied

Rhodes Ridge contains 6.8 billion tonnes of iron ore at an average grade of 61.6 per cent iron, including 5.3 billion tonnes at 62.2 per cent iron and 600 million tonnes at 63.9 per cent iron.

The company’s drilling campaign is not aimed at lifting the size of its resources, however, just improving Rio’s understanding of the path to mining the deposits. It will also testing the variability of the ore grades, and impurities, and help build up a picture of the groundwater and the broader geology of the region.

At the same time Rio will spend about $US77m ($110m) over the next two years to set out the economics of the project, a joint venture with Wright Prospecting.

Rio has not disclosed the terms of its agreement with Wright, but such agreements typically include terms requiring the major partner to conduct most of the spending during the study phase, to be repaid when the mine is given the go-ahead.

Barclay’s analysts noted in October, following a Pilbara site tour with Rio, the company had already negotiated rail and port fees with Wright Prospecting, as well as “carried interest mine financing”.

Analysts have tipped the development to come in at a lower cost, per tonne of production, than Rio’s new $US3.1bn Gudai-Darra operation, which required a new 100km rail spur connecting the mine to the rest of Rio’s rail network.

Instead Rio says it will target an initial 40 million tonne a year mine development at the northern end of the project area, where a rail line already runs to the company’s Hope Downs joint venture with Hancock Prospecting. Rio confirmed on Tuesday it hopes to begin operating at Rhodes Ridge by the end of the decade.

Rio Tinto Iron Ore chief executive Simon Trott said the size and quality of the resource base at Rhodes Ridge has the potential to underpin the company’s iron ore business in the Pilbara for decades to come.

“Longer term, the resource could support a world-class mining hub with a potential capacity of more than 100 million tonnes of high-quality iron ore a year,” he said.

As Rio gets cracking on studies at Rhodes Ridge, Fortescue said on Tuesday it was about to load the ship with ore from its Belinga project in Gabon.

The company did not give any indication of the volumes or destination of the ore, but Fortescue Metals chief executive Dino Otranto said it was part of the “initial project phase” of the mine, suggesting the ore moved will be test shipments to potential customers for the ore.

Fortescue said in July it had moved the first ore on road and rail to its port facilities in Gabon to help the company commission its transport infrastructure under load.

The iron ore major has said it plans to spend about $US200m in capital to develop a small iron ore export operation in Gabon, as a prelude to the development of the broader Belinga deposit.

Originally published as Rio Tinto to spend $500m on studies, drilling, to get Rhodes Ridge into shape