demand for ore to double in 15 years

Diversified mining giant Rio Tinto said last week that it expected demand for iron-ore, aluminium and copper to double over the next 15 years, driven by industrialisation and urbanisation.

CEO Tom Albanese said in a speech delivered at the com- panys annual general meeting that the group also expected a substantial increase in the demand for energy products.

Albanese noted that, by 2030, the additional supply required would be equivalent to replicating the iron-ore output of Australias Pilbara region every five years, adding another aluminium production complex the size of Canadas Saguenay every nine months, and devel- oping another copper mine the size of Escondida, in Chile, each year.

Future energy requirements were such that an entire coal supply chain the size of Hunter Valley, in Australias New South Wales, needed to be created each year, as well as a uranium mine the size of Ranger, in Northern Territory, every four years.

These trends will require a significant response from producers, Albanese said, add- ing that Rio Tinto was well placed to benefit from what is an attractive business.

Albanese also said that Rio Tinto would look outside Australia to grow its iron-ore production.

Last month, for example, we decided to reinstate the concentrate expansion project to 22-million tons a year at the Iron Ore Company of Canada. While this operation has been producing mainly for the European steel industry, we are increasingly able to sell its product into the Asian market. Further expansions are possible at this business.

He added that the completion of the proposed joint venture with Chinese steel producer Chinalco would bring momentum to the development of the Simandou iron-ore project, in Guinea.

The scope of the project covered a large iron-ore mine and infrastructure to serve operations, including the construction of a 700-km railway to the coast, where a deep-water port would be developed from scratch.

The group would also evaluate options to expand current capacity in the Pilbara from 220-million tons a year to 280-million tons by 2013, and to 330-million tons by 2015, but, Albanese said, Australias tax reform had made the evaluation more complex.

The company was also con- tinuing to progress the Orissa iron-ore project, in India.

In the aluminium sector, Rio completed the start-up of a smelter in the Middle East during 2009, to which it con- tributed the most advanced version of its proprietary smelting technology.

An expansion of the Yarwun refinery, in Queensland, would increase alumina production by two-million tons a year, starting in the second half of 2012.

Albanese noted that the companys copper division increased its stake in the Oyu Tolgoi project, in Mongolia, through additional investment in the majority owner, Ivanhoe Mines. The investment agreement with the government of Mongolia recently came into effect, and construction work had now begun.

We also approved $340-million of investment in the moly autoclave project at Kennecott. This will increase our overall moly recoveries, Albanese said.

More recently, Rio completed the permitting of its Eagle nickel project, in Michigan. Eagle, which was discovered by the companys exploration team, was one of several geological prospects in a large regional land position with great exploration potential.

As we continue to experience a secular uplift in demand for the commodities that Rio Tinto produces, I am proud that we have built a suite of world-class growth options for the group across a variety of commodities and geographies, Albanese said.

He added that, during the second half of last year, the company estimated that its capital budget for 2010 would be between $5-billion and $6- billion.

However, he added that, over the past few months, as the company saw the demand outlook improve significantly, it started to approve new capital expenditure for growth projects on a case-by-case basis.

I expect that new project approvals will continue as opportunities present themselves throughout the rest of the year, Albanese said.

Edited by: Martin Zhuwakinyu