RIO Rio Tinto Limited

   By Rhiannon Hoyle 
 

SYDNEY--Rio Tinto PLC (RIO.LN) approved a US$2.6 billion iron-ore mine in the Australian Outback that will be the miner's most high-tech operation to date and buoy future production as older pits are depleted.

Rio Tinto, the world's second biggest mining company by value and No. 2 shipper of iron ore, the key ingredient in steel, said it will start construction of the Koodaideri iron-ore mine in Western Australia state next year with the goal of producing ore there by late 2021.

"Koodaideri is a game-changer for Rio Tinto," said Chief Executive Jean-Sebastien Jacques. "It will be the most technologically advanced mine we have ever built and sets a new benchmark for the industry in terms of the adoption of automation and the use of data to enhance safety and productivity."

Mining companies have been stepping up their use of technologies such as automated drills and trucks, drones and sensors as they strive to make their mines less costly and more efficient.

Rio Tinto, widely viewed as a mining-industry leader on technology, says the Koodaideri mine will include more than 70 innovations that have been used ad hoc across its existing pits including a digital replica of the processing plant, an automated workshop and data analytics aimed at getting the best output and cutting downtime.

At full capacity, the mine will produce 43 million metric tons of iron ore a year. That will help sustain Rio Tinto's existing production of Pilbara Blend, its flagship product, the company said.

Last year, Rio Tinto produced 330 million tons from Australia's remote Pilbara region, where it runs a network of more than a dozen mines, 1,000 miles of rail and several port terminals. The company has been working to shore up its future supply of iron ore to help replace older mines, predicting the world will continue to demand plenty of steel as big buyers such as China continue to expand, even at lesser rates.

Rio Tinto has long relied on iron ore for much of its profits, running some of the cheapest mines in the world with earnings margins higher than 60%.

The US$2.6-billion budget includes US$146 million approved in August for early works at the site. In addition to the mine, the company will build an airport and worker camp.

The cost will be higher than the US$2.2 billion estimated in 2016, which Rio Tinto said is linked to a capacity increase to 43 million tons from an earlier proposal of 40 million. It has also factored in cost inflation for labor and materials.

Rio Tinto also approved a US$44 million study into a possible later expansion of the operation, which could increase production to 70 million tons or beyond.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

(END) Dow Jones Newswires

November 28, 2018 17:46 ET (22:46 GMT)

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