Rio Tinto to Buy Iron Ore from Future IOH Mine

Rio Tinto, through its Hamersley Iron subsidiary, and Iron Ore Holdings Ltd. (IOH) agreed on commercial terms for an innovative mine-gate sales arrangement. Under the arrangement, Rio Tinto would purchase iron ore from a new IOH mine at Phil’s Creek, 90 km from Newman in Western Australia. Once the feasibility of developing the Phil’s Creek deposit is proven, the mine would be owned and operated by IOH, and Rio Tinto would purchase the supplied iron ore and transport it for sale to its customers. IOH would deliver the ore to the Yandicoogina stockyard, where Rio Tinto would assume ownership. The mine would produce an estimated 1 to 1.5 million mt/y.

Rio Tinto Iron Ore CEO Sam Walsh said the agreement was an innovative solution that suited both parties. “This commercial agreement represents an excellent opportunity for Rio Tinto to gain access to extra tonnage, and importantly, in a way that does not jeopardize the efficiency of our fully integrated production system. It also enables IOH to develop a small resource that would face large capital costs on a stand-alone basis and most likely remain undeveloped.

“The output from this proposed mine is less than 1% of our total Pilbara production. With our exponential growth from 220 to 320 million mt per year and beyond, and infrastructure expansions possibly preceding mine supply, we can stockpile the ore to capitalize on rail and shipping opportunities as they arise,” said Walsh.

IOH was established in December 2003 and listed on the ASX in May of 2005. The company said its strategy is to prove up and mine commercial quantities of Direct Shipping channel iron deposit type iron ore on its tenements in the Pilbara region, adjacent to BHP Billiton’s and Hamersley Iron’s Yandi and Yandicoogina mines and also Robe River’s Mesa J mine.

The Phil’s Creek deposit comprises 8.3 million mt of indicated mineral resources grading 58.1% Fe. The deposit is pisolite ore situated 5 km from Rio Tinto’s Yandicoogina mine.

As featured in Womp 08 Vol 7 - www.womp-int.com