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Rio Tinto talks up Pilbara iron ore at Perth presentation
Rio Tinto talked up its Pilbara operations in a presentation to investors and analysts in Western Australia on Monday, with the company explaining that its iron ore business was set to develop "greater flexibility" across its system of mines, railways and ports in the Australian state.
The FTSE 100 firm said that would ensure it was capable of "dynamically responding" to changes in market and consumer demand.
Rio Tinto iron ore chief executive Chris Salisbury said the company's strategy was to optimise its Pilbara assets to deliver value for shareholders.
"Our iron ore business delivered $7.3bn of free cash flow in 2017, and we will continue to maximise free cash flow by pursuing a value-over-volume approach, built on a portfolio of world-class assets that deliver our premium iron ore product, the Pilbara Blend," he explained.
Salisbury said Rio Tinto was driving productivity improvements across the business, and was continuing to leverage "considerable value" from innovation and new technology.
He added that Rio Tinto's "pioneering" autonomous rail project, 'AutoHaul', was on schedule to be implemented by the end of the year, and was already delivering benefits to the business through an uplift in rail capacity.
"Removing our bottleneck in rail and increasing flexibility remain a key priority.
"This work is progressing well and rail and mine capacity should be in line with nameplate port capacity by the end of 2019.
"As we have said before, we will continue to optimise the system to provide the flexibility to respond to market conditions."
However, Salisbury said that importantly, capacity was not the same as tonnes shipped, explaining that how Rio Tinto used the capacity of its integrated system would be dynamic, in line with a strict value-over-volume approach.
"We have an extensive pipeline of future development options, which we continue to grow. In 2018, our 700 kilometre drilling programme will provide both ongoing reserve replenishment and significant optionality to optimise operations."
Rio Tinto said that more than 4,500 mine-to-market productivity initiatives were being pursued in iron ore, delivering $500m in additional free cash flow per year by 2021 as part of an annual group-wide target of $1.5bn.
The company's productivity and cash focus were said to be "increasingly important" to offset early signs of cost inflation which were returning to the industry.
Rio into said its "sector-leading" application of new technology was also being discussed at the meeting in Perth, including the continued successful roll out of automation, with 95 autonomous trucks and 11 autonomous drills already in operation.
Work was progressing on the feasibility study for the Koodaideri project, designed to be the first mine to take full advantage of those innovations.
Salisbury also said the company was continuing to benefit from changes in the Chinese steel industry.
"The steel industry in China has undergone a significant shift in recent times due to supply-side reforms and environmental policy improvements," he said.
"We believe these reforms are structural and that our business is well positioned to take advantage of these changes due to robust demand for our high quality products, including the Pilbara Blend."