AN (UN)RE­FINED STRAT­EGY

Surg­ing de­mand from Chi­nese alu­mina re­finer­ies is help­ing push the price of the baux­ite back up – for now, any­way – ahead of the coun­try’s ag­gres­sive win­ter shut­down pol­icy. Yet the long term fun­da­men­tals are very promis­ing, and Rio Tinto’s Am­run de­vel­opm

The Australian Mining Review - - RIO TINTO: AMRUN - REUBEN ADAMS

“The pro­jected growth rate, mostly driven by seaborne baux­ite traded into the China mar­ket, is out­pac­ing that of alu­minium.” A na­tional pro­ject

IN Au­gust, Chi­nese baux­ite and alu­mina im­ports in­creased 46 per cent and 123 per cent re­spec­tively.

By late Oc­to­ber the alu­mina price, based on Metal Bulletin’s FOB Aus­tralia in­dex, had climbed 53 per­cent to $469.74 a tonne in two months; its high­est level since the in­dex was launched in 2010.

In an Oc­to­ber note, Wood Macken­zie se­nior an­a­lyst Ami Shivkar stated that there was still steam left in the price rally ahead of the man­dated win­ter re­fin­ing shut­down.

“All the Chi­nese re­finer­ies don’t have the amount of baux­ite they want and smelters are still stock­pil­ing.”

Long term fore­casts are also pos­i­tive. In Au­gust, Rio Tinto pre­dicted that im­ports would play an in­creas­ingly im­por­tant role for China, which con­tin­ued to add re­fin­ing ca­pac­ity while grap­pling with de­clines in do­mes­tic baux­ite qual­ity.

Aus­tralia is the world’s largest pro­ducer of baux­ite, ac­count­ing for about one-third of global out­put in 2016-17.

Do­mes­tic pro­duc­tion is ex­pected to reach 83.4 mil­lion tonnes in 2016-17, up from 72.9 mil­lion tonnes in 2011-12 ac­cord­ing to IbisWorld.

North QLD has some of Earth’s largest known baux­ite de­posits, and the re­gion is home to a num­ber of ad­vanced, world class projects as com­pa­nies look to take ad­van­tage of healthy de­mand.

Lead­ing the charge is Rio Tinto’s Am­run pro­ject, which is sched­uled for com­ple­tion in 2019.

An­nounc­ing the de­vel­op­ment de­ci­sion in Novem­ber 2015, for­mer Rio chief executive Sam Walsh called Am­run one of the high­est qual­ity baux­ite projects in the world.

“This long-life, low-cost, ex­pand­able as­set of­fers a wide va­ri­ety of de­vel­op­ment op­tions and path­ways over the com­ing decades,” he said.

“We are es­tab­lish­ing Cape York baux­ite as the prod­uct of choice for the Chi­nese seaborne mar­ket with con­sis­tent qual­ity, se­cu­rity of sup­ply and strong tech­ni­cal marketing sup­port.

“Am­run will be sig­nif­i­cant in help­ing to meet grow­ing baux­ite de­mand from China.”

This fore­cast is prov­ing cor­rect. With re­vived plans to re­duce ex­po­sure to down­stream alu­minium pro­cess­ing through the sale of its ‘Pro­ject Lego’ as­sets, Rio is see­ing baux­ite ex­ports as its most value-gen­er­a­tive propo­si­tion.

“Prospects for baux­ite – a sec­tor where Rio Tinto main­tains a very strong com­pet­i­tive po­si­tion – are pos­i­tive,” Rio’s 2016 Strate­gic Re­port stated.

“The pro­jected growth rate, mostly driven by seaborne baux­ite traded into the China mar­ket, is out­pac­ing that of alu­minium.

“This is due to both a desire by China to be self-suf­fi­cient in alu­mina, and the con­tin­u­ing de­ple­tion and re­duc­tion in qual­ity of China’s baux­ite resource po­si­tion.”

The $2.6 bil­lion Am­run pro­ject in­volves con­struc­tion of a baux­ite mine and as­so­ci­ated pro­cess­ing and port fa­cil­i­ties about 40km south of the Em­b­ley River near Boyd Point on Cape York Penin­sula.

Once op­er­a­tional, Am­run will re­place pro­duc­tion from the ex­ist­ing East Weipa mine and in­crease over­all an­nual ex­ports by about 10mtpa. Planned ini­tial out­put is 22.8 mil­lion tonnes per year, but there are op­tions for fu­ture ex­pan­sions up to 50mtpa.

By March 2017 Rio had awarded more than $900 mil­lion in con­tracts to 509 QLD sup­pli­ers; and al­most two thirds of the $1.38bn in con­tracts were awarded to Australian sup­pli­ers.

Third quar­ter re­sults saw the pro­ject on sched­ule for first ship­ment in H1 2019, ac­cord­ing to the com­pany.

“The Am­run pro­ject is ad­vanc­ing to plan with key con­struc­tion ac­tiv­i­ties con­tin­u­ing, in­clud­ing in­stal­la­tion of the first three wharf mod­ules and fab­ri­ca­tion and trans­porta­tion to site of the process plant ben­e­fi­ci­a­tion mod­ules,” the com­pany stated in its Q3 re­port. By Novem­ber, Am­run had cre­ated 470 jobs across Aus­tralia, Rio an­nounced.

In 2016, WA sup­plier Civmec was awarded the $160m con­tract to con­struct a pro­cess­ing fa­cil­ity; in­clud­ing a ben­e­fi­ci­a­tion plant and as­so­ci­ated wa­ter, elec­tri­cal and light­ing sys­tems.

The fab­ri­ca­tion, pre-cast man­u­fac­ture and as­sem­bly work for this fa­cil­ity has taken place at Civmec’s Perth-based Hen­der­son fa­cil­ity, where about 350 em­ploy­ees in­clud­ing sub­con­trac­tors are work­ing on fab­ri­ca­tion and an­other 120 on mod­ule as­sem­bly.

In Oc­to­ber, a heavy load ves­sel trans­ported three ben­e­fi­ci­a­tion mod­ules and a trans­fer tower into the Port of Weipa.

Th­ese mod­ules each weigh more than 1200 tonnes with di­men­sions of up to 16 me­tres wide, 25 me­tres long and 30 me­tres high.

The re­main­ing three mod­ules were due to ar­rive this month.

The ben­e­fi­ci­a­tion mod­ules will form the cen­tral fa­cil­ity of the plant, where baux­ite from the Am­run mine will be washed and screened on­site be­fore be­ing shipped to cus­tomers.

The fab­ri­ca­tion of key com­po­nents were also made with 95 per cent Australian steel.

Rio Tinto Am­run pro­ject director Mar­cia Han­ra­han said fab­ri­ca­tion of th­ese com­po­nents had show­cased best prac­tice Australian man­u­fac­tur­ing us­ing 4000 tonnes of Australian steel.

“Con­struc­tion of the pro­cess­ing fa­cil­ity has cre­ated hun­dreds of jobs in WA, in ad­di­tion to our cur­rent Am­run work­force of around 1200 in QLD,” she said.

Busi­nesses bid­ding for con­tracts over $1m com­pleted a Lo­cal and Indige­nous Par­tic­i­pa­tion Plan as part of the pro­cure­ment process.

“Al­most 80 per cent of the Am­run work­force are Queens­lan­ders in­clud­ing 176 indige­nous em­ploy­ees of which 43 are lo­cal Abo­rig­i­nal peo­ple,” Ms Han­ra­han said.

“We are proud of the sup­plier and em­ploy­ment op­por­tu­ni­ties we have cre­ated for Aus­tralians and there will be more to come.”

All im­ages: Rio Tinto.

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