Rio Tinto to double uranium output, move to potash
Elisabeth Behrmann
Market Watch
Rio Tinto Ltd.'s plans to double uranium output within the next five years center on raising production at its existing operation in Namibia, but the miner is also in talks for new opportunities in Kazakhstan and Jordan, Preston Chiaro, chief executive of energy and minerals, said Friday.
In a briefing with reporters in Sydney, Chiaro also outlined growth opportunities in coal, potash and titanium, part of Rio's strategy talking up the present and future value of its business to fend off BHP Billiton Ltd.'s takeover bid valued around US$170 billion.
Two major potash projects in Argentina and Canada will make Rio a major producer in potash, a fertilizer, accounting for around 10% of the global market by 2012, Chiaro said.
"The potash market is set to grow by about 3% annually as food demand goes up and because of arable land degradation," said Chiaro, adding that with the US$3.5 billion Potasio Rio Colorado project in Argentina and the Regina project in Canada, Rio will produce about 6 million metric tons of the fertilizer, or 10% of current global output.
In uranium, rising production costs at its Ranger mine in Australia have shelved previous expansion plans, as well as a fall in uranium prices, and Rio will focus on extending the mine's life, Chiaro said.
"We're pursuing opportunities in Kazakhstan but are also in discussions for prospects in Jordan," Chiaro told reporters.
A key driver for Rio's uranium plans are China's growth in nuclear power, set to go up from a current 9 gigawatts to 60 gigawatts by 2020, Chiaro said.
Uranium producer Energy Resources of Australia, which is a 68% owned subsidiary of Rio Tinto, Friday reported its first sale of uranium to China from its Ranger mine in Australia after bilateral safeguard agreements were reached between the two nations last year.
Rio is already selling uranium to China from its Roessing mine.
However, there are no current plans to start developing the Jabiluka mine lease in the Northern Territory, which is on a long-term care and maintenance agreement with traditional landowners.
"Relations with traditional landowners are good, but there are no discussions to start mining," he said.
In 2007, Roessing produced 6,714 pounds of uranium, and Ranger, the second largest uranium mine in the world, some 11,700 pounds.
Rio plans to double coking coal output by 2015, as well as increasing coking coal output to 18 million metric tons per year, up from just under 10 million tons per annum.
"We're looking at M&A opportunities in coking coal, but they are very highly priced. We're active in exploration in most parts of the world," said Chiaro.
Coking coal benchmark prices tripled this year to US$300 a ton because of major floods in Australia's Bowen Basin, and infrastructure constraints for export.
"It's hard to find a good quality, low cost coking coal prospect that is located close to where infrastructure isn't a problem. This is why prices are going to stay high for some time to come," said Chiaro.
"We don't see any major coking coal operations coming on stream in the world, while demand continues to be strong, leaving the market in a tight situation for the foreseeable future," he added.
In a briefing with reporters in Sydney, Chiaro also outlined growth opportunities in coal, potash and titanium, part of Rio's strategy talking up the present and future value of its business to fend off BHP Billiton Ltd.'s takeover bid valued around US$170 billion.
Two major potash projects in Argentina and Canada will make Rio a major producer in potash, a fertilizer, accounting for around 10% of the global market by 2012, Chiaro said.
"The potash market is set to grow by about 3% annually as food demand goes up and because of arable land degradation," said Chiaro, adding that with the US$3.5 billion Potasio Rio Colorado project in Argentina and the Regina project in Canada, Rio will produce about 6 million metric tons of the fertilizer, or 10% of current global output.
In uranium, rising production costs at its Ranger mine in Australia have shelved previous expansion plans, as well as a fall in uranium prices, and Rio will focus on extending the mine's life, Chiaro said.
"We're pursuing opportunities in Kazakhstan but are also in discussions for prospects in Jordan," Chiaro told reporters.
A key driver for Rio's uranium plans are China's growth in nuclear power, set to go up from a current 9 gigawatts to 60 gigawatts by 2020, Chiaro said.
Uranium producer Energy Resources of Australia, which is a 68% owned subsidiary of Rio Tinto, Friday reported its first sale of uranium to China from its Ranger mine in Australia after bilateral safeguard agreements were reached between the two nations last year.
Rio is already selling uranium to China from its Roessing mine.
However, there are no current plans to start developing the Jabiluka mine lease in the Northern Territory, which is on a long-term care and maintenance agreement with traditional landowners.
"Relations with traditional landowners are good, but there are no discussions to start mining," he said.
In 2007, Roessing produced 6,714 pounds of uranium, and Ranger, the second largest uranium mine in the world, some 11,700 pounds.
Rio plans to double coking coal output by 2015, as well as increasing coking coal output to 18 million metric tons per year, up from just under 10 million tons per annum.
"We're looking at M&A opportunities in coking coal, but they are very highly priced. We're active in exploration in most parts of the world," said Chiaro.
Coking coal benchmark prices tripled this year to US$300 a ton because of major floods in Australia's Bowen Basin, and infrastructure constraints for export.
"It's hard to find a good quality, low cost coking coal prospect that is located close to where infrastructure isn't a problem. This is why prices are going to stay high for some time to come," said Chiaro.
"We don't see any major coking coal operations coming on stream in the world, while demand continues to be strong, leaving the market in a tight situation for the foreseeable future," he added.