PERTH (miningweekly.com) – Mining giant Rio Tinto would continue with its push to grow capacity, despite the challenging environment, CEO Sam Walsh this week told the Merrill Lynch global metals, mining and steel conference, in Barcelona, Spain.

“The recent environment has been difficult – as we have cut costs we have reduced our workforce and retrenched a number of very able people. But challenging times require tough action.

“Over the past three years we have positioned ourselves for this environment of subdued pricing and economic uncertainty,” Walsh said.

He noted that since 2012, Rio Tinto has reduced its capital expenditure by 54%, and now had the second lowest spend in its peer group. He added that the reduction had not compromised growth.

“Growth is critical for providing future shareholder returns. But it has to be about value creation,” Walsh said.

Pointing to the Pilbara, Walsh noted that Rio would be completing the infrastructure for its Pilbara 360 project within the next few weeks, which would increase the company’s production capacity to 360-million tonnes a year.

“The use of brownfield projects will deliver highly value accretive production, at an average capital intensity of just $9/t.”

“Our intention is to maximise the value of the 360 infrastructure through debottlenecking and productivity improvements. We will of course invest to ensure the integrity of the Pilbara blend, but do not anticipate capital investment in further volume at this time.”

Walsh added that Rio’s growth options extended further than the Pilbara, and, in fact, included all its divisions.

In its aluminium division, Rio was expecting first pour from its Kitimat aluminium smelter, in British Columbia, following a $4.8-billion modernisation which increased production by about 48% to about 420 000 t/y.

With the modernisation of Kitimat, 80% of Rio’s smelters would be in the first quartile, backed by long-life, low-cost hydropower. This, Walsh said, was complemented by the company’s bauxite operations, which brought exceptional growth opportunities.

Later this year, the company would also be reviewing the feasibility study for South of Embley, in Queensland.

The South of Embley project would see Rio Tinto Alcan extend bauxite mining on an existing mining lease south of its current operations near Weipa and build new infrastructure including a power station, processing plant, warehouses, workshops, barge and ferry facilities and shiploading facilities.

Walsh said that this project would create a major expansion in seaborne bauxite, increasing Rio’s volumes by about 50%, in a market that generated 44% earnings before interest, taxes, depreciation and amortisation margins on a free-on-board basis last year.

“Our aluminium division has been working hard on productivity and cost for a number of years, delivering some low-cost creep tonnes across both primary aluminium and bauxite product segments. This approach is embedded in our organisation and I expect continued low-cost creep tonnes to be delivered across our businesses.”

Rio was also developing phased growth in its copper division.

“In the near term, we anticipate additional copper volumes from the ramp up of the new concentrator at Escondida, the recovery at Kennecott Utah Copper as we progress deweighting and dewatering and higher grades coming through at Grasberg.”

In the medium term, the company would see a significant uplift in volumes from Oyu Tolgoi, in Mongolia, while in the longer-term, Rio had the Resolution project in Arizona, where permitting was under way.

“In times like these the value of our assets really shines. We will continue to focus on getting the most value from our assets through operating and commercial excellence. And our portfolio of growth options will be delivered in a way that maximises future returns for shareholders,” Walsh said.