Sil­ver­grass a sign grade and qual­ity count most

The West Australian - - WESTBUSINESS - Stu­art McKin­non The re­porter trav­elled to the Pil­bara as a guest of Rio Tinto

The vol­ume chase in the WA iron ore game is over, it’s all about grade and qual­ity.

That was the mes­sage from Rio Tinto chief ex­ec­u­tive JeanSe­bastien Jac­ques yes­ter­day at the of­fi­cial open­ing of the min­ing gi­ant’s $US338 mil­lion, 20mtpa Sil­ver­grass project.

Sil­ver­grass is Rio’s 16th iron ore mine in the Pil­bara, but the com­pany is more fo­cused on the high-grade ore it will pro­duce than the 10mtpa it will add to its pro­duc­tion pro­file.

The re­cent re­struc­tur­ing of China’s steel in­dus­try which has forced many older, in­ef­fi­cient, pol­lut­ing blast fur­naces to close, means the re­main­ing mills are de­mand­ing higher-qual­ity ore to make up the short­fall in ca­pac­ity. The trend has meant a sig­nif­i­cant dis­count (30-40 per cent) for lower-grade ore, tight­en­ing the grip of the iron ore ma­jors, Rio, BHP and Vale, in the global seaborne trade of the com­mod­ity. The three ma­jors pro­duce a 62 per cent-plus iron prod­uct, which is in high de­mand, pro­vid­ing healthy EBITDA mar­gins for their re­spec­tive busi­nesses.

Mr Jac­ques said Sil­ver­grass high­lighted the com­pany’s value-over-vol­ume ap­proach to its iron ore busi­ness.

“The beauty . . . of Sil­ver­grass is the 20mtpa of ‘low-phos’ prod­uct that we will blend with the prod­uct com­ing from our 15 other Pil­bara mines will make sure that we con­tinue to pro­vide a very con­sis­tent prod­uct to China,” he said. “For them (China) to con­tinue to pro­duce the right out­put, they need to have bet­ter qual­ity raw ma­te­ri­als, in­clud­ing the grades that we will pro­duce at Sil­ver­grass.

“I know it’s still early days but when you look at the pre­mium or the dis­count or the spread be­tween the high grade and the lower grade, it’s a sign that the re­struc­tur­ing is tak­ing place as we speak.”

Pre­mier Mark McGowan of­fi­cially opened the fully au­to­mated mine yes­ter­day, not­ing it had cre­ated 500 jobs dur­ing con­struc­tion and would sus­tain al­most 250 po­si­tions in op­er­a­tion.

Con­tracts worth more than $180 mil­lion were awarded dur­ing the con­struc­tion phase. Ore from Sil­ver­grass will travel via a new 9km con­veyor to ex­ist­ing pro­cess­ing fa­cil­i­ties at Num­muldi be­fore be­ing loaded on to trains des­tined for one of Rio’s two Pil­bara ports for ex­port.

Ear­lier this year, Rio Tinto re­ac­ti­vated long-de­layed plans for its $US2.2 bil­lion Koodaideri iron ore project, 110km west­north-west of New­man.

The min­ing gi­ant ad­vised it had ap­proved a $31 mil­lion fea­si­bil­ity study for the green­fields project, which is ex­pected to cre­ate 1600 jobs in con­struc­tion and re­quire 600 staff in op­er­a­tion.

Rio could make a fi­nal in­vest­ment de­ci­sion next year, with con­struc­tion start­ing in 2019 and pro­duc­tion be­gin­ning in 2021.

Rio Tinto chief ex­ec­u­tive Jean-Se­bastien Jac­ques and Pre­mier Mark McGowan at Sil­ver­grass.

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