World Slowdown Puts a Freeze on Rio Tinto’s Iron Ore Expansion in Brazil

Rio Tinto Corumbá operation in Brazil The collapse of commodity prices and demand has led giant Australian-UK minerals corporation Rio Tinto to announce the postponement of one of its key iron ore expansion projects, the US$ 2.15 billion Corumbá mine in the heartland of Brazil.

The proposed expansion of the mines has been put on the back burner "until market conditions improve". The project was given the go-ahead only in July, when Rio was digging deep to come up with growth projects to justify its fierce rejection of BHP Billiton's aborted takeover offer.

The expansion of Corumbá from 2 million tons a year to 12.8 million tons from the fourth quarter of 2010 was meant to be a precursor to an expansion there to 23.2 million tons a year – part of Rio Tinto's previous plans to triple total annual iron ore production to more than 600 million tons a year.

The project included building a port on the Uruguayan side of the River Plate where the barges carrying the mineral ore along the Paraná River would transship to larger vessels.

While the postponement of Corumbá is significant, it is small compared with Rio's full slash-and-burn response to last year's collapse in the commodities boom, which came at a time when Rio was loaded with debt as a result of the ill-timed acquisition of Alcan.

The group's full response is due to be announced next month with the release of the group's 2008 profit result. Rio Tinto has foreshadowed big production cuts, job losses, project deferrals and asset sales as it sets out to reduce debt to more manageable levels.

An asset that could be put up for sale is Rio Tinto's 76% interest in Hunter Valley coalminer Coal & Allied. Chinese coal group Shenhua Energy was reported by the South China Morning Post on Sunday to be one of the groups interested in taking on the Rio stake in C&A, valued by the market at US$ 5.2 billion.

Mercopress

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