“Amrun will be significant in helping to meet growing bauxite demand from China”.
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Bauxite is mined near the surface and refined into alumina, an intermediate product that’s further refined into aluminum, the metal used in cans and window frames. While the aluminium sector is under pressure because of the growth in Chinese capacity, Rio executives think they should have an advantage in bauxite, which they think is akin to the miner’s vast Australian iron ore operation in terms of the logistical challenge of moving millions of tonnes of material annually.
Rio Tinto said that the production from the Amrun project, which was formerly known as South of Embley, would increase annual bauxite exports by about 10 million ton from Cape York and would replace with the output of the diminishing East Weipa mine.
Some analysts are more wary.
Mining companies including Rio Tinto have been selling assets, slowing spending and cutting production of some commodities to shield profits from weak prices. And the analyst remains confident: “Even with Amrun approved, we still see the seaborne bauxite market moving into deficit by 2020, despite our assumption that some Malaysian exports remain in the market and exports increase from Guinea and Brazil”. The downturn in global commodity markets largely reflects slowing demand from China, which is the world’s biggest buyer of everything from iron ore to zinc.
Rio Tinto’s motive is not only profit.
Recently, company’s CEO Sam Walsh visited the project site, during a trip to Australia, indicating the new interest in the project.
“The commission is satisfied that the mine complex’s significant benefits outweigh its potential impacts”, the New South Wales state Planning and Assessment Commission said in a statement, echoing a preliminary decision from last month. The project is expected to cost the company $1.9 billion.
Rio Tinto’s South of Embley bauxite mine and port development was approved by the Australian Environment Minister Tony Burke in May 2013.
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Despite the climate change mitigation initiatives of governments aimed at curbing the use of coal, Rio Tinto is still upbeat that coal will continue to have its future in the world’s energy mix, at least for the next 50 years. Mr. Barrios said he couldn’t comment on whether the Amrun investment reduced the likelihood the company would repurchase more shares in the year ahead.
