In a recent briefing ahead of an investor tour of its Pilbara operations, Rio Tinto PLC (LSE:ASX:RIO) iron ore chief executive Simon Trott outlined the company’s strategy to increase production and reduce costs.
Trott said the construction of four new replacement mines across the Pilbara would help the company further control its costs.
Rio Tinto has set an ambitious target to lower costs to US$20 per tonne, compared to the current cost range of US$21.50 to US$22.50 per tonne of iron ore it currently produces out of the Pilbara.
The impending development in the Pilbara will coincide with the start-up of the large high-grade Simandou operation in the Republic of Guinea.
Rio Tinto believes that the global iron ore market can absorb the additional production. Trott stated, "This is a market that needs two billion tonnes of iron ore. A lot of urbanization has happened but a lot of urbanization is still to come."
On track to deliver production target
Trott confirmed that the company is on track to deliver towards the upper end of its 2023 iron ore production target of between 320 and 335 million tonnes. The rollout of new Pilbara mines is also expected to contribute to the company's midterm annual production target of between 345 and 360 million tonnes.
Rio Tinto’s existing Gudai-Darri mine in the Pilbara is poised for substantial production growth. The company anticipates that by investing an additional $70 million in the mine, its annual capacity of 43 million tonnes can be augmented to reach 50 million tonnes.
Trott emphasized that the projected rise in Pilbara production will complement the increased output from Guinea.
“Frugality drives innovation”
Trott said the aim to lower the Pilbara production costs to US$20 was part of Rio Tinto’s efforts to drive out waste and improve productivity.
He said: “When you look back over the last five or 10 years, we probably held on to being the lowest cost for probably a bit too long and we probably made some decisions that weren’t actually value-based.
“Frugality drives innovation in our business, in our view, and so I really want to make sure that that statement of intent is there.”