Rio Tinto to go ahead with US$1.9b bauxite expansion in Australia

Rio Tinto gave the go-ahead on Friday to expand its bauxite output in northern Australia with a US$1.9 billion project, approving a major mine at a time when most rivals worldwide are slashing spending.

The Amrun project in Queensland state will initially produce 22.8 million tonnes of bauxite a year, replacing output from Rio's East Weipa mine and boosting its Cape York exports by 50 per cent, as the company aims to meet soaring demand from Chinese aluminium makers.

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Amrun is one of Rio's top three growth projects, alongside its Australian iron ore expansion and its planned expansion of the Oyu Tolgoi copper mine in Mongolia, where US$4.5 billion in project finance is due to be sealed in December.

The bauxite project cost is up to US$500 million less than some analysts had expected, with Rio able to take advantage of cheaper labour and equipment as projects have dried up amid the mining bust.

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.

“It is quite an amazing project and it has potential for growth,” Rio Tinto's aluminium chief executive Alfredo Barrios said.

Operating costs are expected to be lower than current unit costs at its Australian bauxite mines, he said.