Rio Tinto's decision to proceed with Pilbara iron ore project welcomed

September 17, 1997

Today's decision by Rio Tinto to proceed with the $700 million Yandicoogina iron ore project in the Pilbara is yet another vote of confidence in Western Australia and the State's resources industry.

WA Resources Development Minister Colin Barnett said the State Government approved the project last year under the Iron Ore (Yandicoogina) Agreement Act, which was passed by Parliament in November.

Mr Barnett said the decision came amid a number of other recent resource development announcements in WA totalling more than $2 billion, including: the $200 million Bulong nickel project, the $900 million Murrin Murrin nickel development, the $200 million Cawse nickel project and the $800 million expansion by Worsley Alumina.

The Minister said that under the Agreement Act, Hamersley Iron, owners of the Yandicoogina deposit, were obliged to further process the Yandicoogina iron ore deposit into products such as direct reduced iron (DRI). This processing would be triggered by production levels from the mine.

Construction of the project, in the central Hamersley Range area 150km east of Tom Price, was due to commence later this year. Production and shipments were due to start mid-1999.

The Yandicoogina deposit contains three billion tonnes of pisolitic iron ore. Plans are to develop the deposit as an open cut operation with on-site crushing and screening to produce a low alumina fines product.

"The project will have a peak construction workforce of 800 people and an operational workforce of around 140 people," Mr Barnett said.

"Hamersley Iron also estimates the project's local content will be around 80 per cent, which is extremely encouraging.

"The mine has an estimated 30-year life span and will commence production at the rate of five million tonnes per annum, increasing to a capacity of 15 million tonnes per year. It will be connected to the existing Hamersley iron railway system via a 147km rail line between Yandicoogina and Marandoo."

"I am very pleased that Rio Tinto recognises WA as a competitive location for expanding its current activities. Over the past 30 years, Hamersley Iron has played a major role in helping to develop the Pilbara. This new project will contribute to the development of the central Pilbara region as the future focus of iron ore operations.

"Taking into account the Yandicoogina development, Hamersley Iron would have committed around $1.3 billion of new capital investment in WA since 1990."

Mr Barnett said the State Agreement detailed an obligation for the company to further process once it had mined for 10 years or produced 150 million tonnes of iron ore.

"The State Government is working hard to develop an environment in which downstream processing in the iron ore industry can occur and a number of steps, including deregulation of the energy industry, are contributing to this," he said.

"Processing obligations in iron ore agreements provide an important impetus for the iron ore producers to continue to value add and further benefit the State."

Other important features of the agreement include:

·      the initial term of the mining lease will be 21 years with the company having the right to two successive renewals of 21 years;

·      a fixed royalty rate for the first 14 years after which the royalty payable becomes that prescribed from time to time under the Mining Act;

·      royalty reductions of 0.5 per cent for iron ore processed into pellets, one per cent for iron ore processed into metallised agglomerates and two per cent for iron ore processed into steel; and -

·      a railway will be constructed to serve the project and will run westward from the mine and cross the Great Northern Highway to link up with the existing Marandoo to Dampier railway.

Media contact: Justine Whittome (08) 9222 9699