Mining giant Rio Tinto has approved the development of a $1.9bn Amrun bauxite project in Australia, in order to meet growing demand from China.
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Production and shipping from the mine is expected from the first half of 2019, ramping up to full output by the end of the year.
Much of the early output from Amrun will offset declining production from another mine on the Cape York peninsula-East Weipa-where ore reserves are running out.
The project gives Rio the option of expanding production to 50 million tonnes a year in the future. The majority of the capital expenditure for the project will fall in 2017 and 2018.
Amrun project involves an open-cut mine, processing plant and bauxite stockpiles, a power station, warehouses, well as new barge, ferry, and ship loading facilities.
Walsh noted that Amrun would “certainly achieve” more than the company-wide internal rate of return benchmark of 15 percent.
Deutsche Bank mining analyst Paul Young said the approval is a “significant signal to Rio shareholders” – particularly that the company is willing to invest in growth against the cycle.
Sceptics who have watched Rio Tinto sink billions of dollars to expand during the boom years while its share price has sunk to close to a six-year low question the wisdom of pouring money into a project now. “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.
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Rio has also changed the name of the mine to the Aboriginal word Amrun, a traditional indigenous name for the area. The region supplies the bauxite used to produce roughly 10% of the world’s aluminum.
