Rio Tinto approves $1.9bn expansion of Amrun bauxite project in Australia

Rio expects to begin shipping from the expansion project in the first half of 2019.

As with its iron ore operations in Western Australia, Rio can win an advantage in bauxite because of the nation’s proximity to China, Mark Pervan, Australia & New Zealand Banking Group’s head of commodity research in Melbourne, said by phone.

Amrun is located 40 kilometres (25 miles) south of Rio’s existing bauxite mines on the peninsula, East Weipa and Andoom.

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.

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.

It aims to start producing at Amrun, previously called South of Embley, in 2019 and said it hoped to eventually expand the mine to produce 50 million tonnes a year, tapping into 1.5 billion tonnes of reserves.

Amrun involves the construction of a bauxite mine and associated processing and port facilities on the Cape York Peninsula in north Queensland.

“Amrun is one of the highest quality bauxite projects in the world”.

The green light will help allay some investor concerns over Rio’s growth pipeline, as it shows the miner can afford growth at an incredibly low point in the cycle.

Mining companies including Rio Tinto have been selling assets, slowing spending and cutting production of some commodities to shield profits from weak commodity prices. “At this level of production, it may last only another three or four years”. Rio is one of a few large miners with a significant presence in bauxite and others are likely to look to add production, he said.

Recently, company’s CEO Sam Walsh visited the project site, during a trip to Australia, indicating the new interest in the project.

Still, Mr. Jacques on Thursday said it wasn’t Rio Tinto’s strategy to diversify for the sake of it. “Diversification has not proven to, necessarily, be a hedge against bad times, as many had previously thought”, he said.

Queensland Premier Annastacia Palaszczuk said the project was one of the biggest investments outside of the south east corner “in many years”.