Silvergrass a sign grade and quality count most
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.