bauxite bauxite bauxite

September 10, 2008

GEARING up for long-term growth in demand for aluminium, Rio Tinto is considering almost tripling bauxite production from its Cape York Peninsula mines.

The Anglo-Australian mining giant is studying boosting production at its Weipa operations from 18 million tonnes a year to 35 million tonnes from 2013 but has also asked the federal Government for approval to go as high as 50 million tonnes in the longer term.

On top of this, Rio is also looking at port deals with China's Chalco, which owns the neighbouring Aurukun bauxite deposit.

Rio has asked for approval to build a new harbour that could ship 63 million tonnes a year, which is as much as the nation currently produces as a whole.

"The capacity of 63 million tonnes a year would allow for the option to ship an additional 13 million tonnes a year from third parties, in addition to Rio Tinto's maximum production of 50 million tonnes," Rio said in a submission to the Environment Department.

Rio has previously said it was in talks about the development of Aurukun, which was won by Chalco in an auction after the Queensland Government stripped it from its previous owner, French group Pechiney.

Any co-operation would probably be done through the region's ports, with Chalco having committed to a $3 billion plan to develop Aurukun and build an east coast Queensland refinery to process the bauxite.

A Rio Tinto spokeswoman declined to comment on the Chalco talks, but said the application was to keep the company's options open and accommodate long-term plans over the next 10 years and beyond.

Rio Tinto Alcan boss Dick Evans recently said expansion could go beyond the 35 million tonnes a year level.

"The nice thing about Weipa is we've got a whole family of potential different expansion levels depending how rapidly we want to ramp that up," Mr Evans, who ran Alcan before Rio Tinto bought it last year, told analysts on a June site visit.

"Seldom do you have the degree of flexibility that I think we have in Weipa in terms of the increments." The $US38 billion ($47 billion) Alcan acquisition has been questioned by Rio's predator BHP Billiton and came under fire last month when Rio released first-half results that showed the unit's profits decreased from a year earlier, despite gains in prices and production.

Rio, which fuels energy-intensive aluminium production by inexpensive hydro-power at its big Quebec smelting centre, has responded by saying the purchase has a much longer-term view on demand growth from industrialisation in China and India.

Rio is looking at spending about $1 billion on its current expansion plans to 35 million tonnes.

That involves expanding production at Weipa by developing land to the south of Weipa, as well as bringing on production to make up for about 13 million tonnes a year of lost production from mines to the north.

If Chalco does not reach agreement with Rio, it plans to build itsown port and send the ore viaconveyor belt across Rio's tenements.