Early August is the winter season in the southern hemisphere, but in the Pilbara region of western Australia, daytime temperatures can still reach around 30 degrees Celsius. This vast area covered by reddish brown rock and soil is dry and rainless, with sparse vegetation. Due to its abundant production of high-quality iron ore, it has become the center of the global mining industry. Its total area reaches 500000 square kilometers, which is similar in size to Sichuan Province.
On the Hammersley Mountains in the Pilbara region, a 24 meter high primary crusher is in the midst of intense construction. Its purpose is to crush the iron ore transported here, process it from a diameter of 1 meter to a diameter of less than 25 centimeters, and load it into an iron ore conveyor belt for further processing in a secondary crusher 18 kilometers away.
The infrastructure projects, including primary crushers and iron ore conveyors, are the key focus of the Xipo iron ore project. Since the beginning of last year, the construction progress of the entire project has reached 75%, and it is expected to be fully completed by March next year.
In 2025, the Xipo iron ore project, jointly built by Rio Tinto and China Baowu, will be officially put into operation and achieve full production in the coming years, with an annual output of 25 million tons of iron ore, equivalent to 7.5% of Rio Tinto's current iron ore production in the Pilbara region.
Rio Tinto is the world's largest iron ore producer, with this business accounting for over 60% of the company's revenue. Since 2019, China Baowu, the world's largest steel producer, has become Rio Tinto's largest single customer.
China Baowu and Rio Tinto signed an agreement in September 2022 to establish a joint venture for the Xipo project, with their respective shareholding ratios of 46% and 54%.
The total investment of the project is about 2 billion US dollars, with the goal of producing 275 million tons of iron ore within the joint venture period. China Baowu will purchase a total of approximately 126 million tons of iron ore from Rio Tinto based on its equity ratio in the Xipo iron ore project, which is approximately 11.5 million tons per year.
On August 9th, Simon Trott, CEO of Rio Tinto Iron Ore, said in an interview with Interface News and other media, "The Xipo Iron Ore project symbolizes an important change in our efforts to expand our iron ore business, which is the further deepening of our business cooperation with Chinese partners
The joint investment in the Xipo iron ore project is a continuation of the previous cooperation between China Baowu and Rio Tinto in developing the Pilbara Dongpo mine project. In 2002, Baosteel Group, the predecessor of China Baowu, and a subsidiary of Rio Tinto established a joint venture called Baoruiji to jointly develop local iron ore resources, namely the Dongpo Mining Project, with an expected production limit of 200 million tons. Baosteel Group and Rio Tinto hold shares of 46% and 54% respectively.
The Dongpo project is still in the mining stage, but as the future production of the project gradually decreases, the focus of cooperation between Rio Tinto and China Baowu in the Pilbara region will shift to the Xipo project. The Dongpo and Xipo projects will share some infrastructure such as secondary crushers.
Map of the Pilbara region, Rio Tinto
The Xipo project is also an important part of Rio Tinto's iron ore expansion plan. Rio Tinto plans to develop a new iron mine annually for the next five years to maintain the sustainable operation of the company's business.
Last year, the company's iron ore production in Pilbara was approximately 332 million tons. Qiao De said that Rio Tinto's medium - to long-term plan is to achieve an annual iron ore production of 345 million to 360 million tons in the Pilbara, an increase of 4% to 8% compared to the current production. Rio Tinto's current iron ore business mainly includes Australian Pilbara and Canadian iron ore companies, with Pilbara production accounting for the absolute majority.
In the past 3-4 years, Rio Tinto's cumulative investment in new mining development in the Pilbara region has exceeded $10 billion. This includes the Kudaideli project, which will be put into operation in 2022. The total investment for this new mine with an annual production capacity of 43 million tons is approximately 3.1 billion US dollars.
In the coming years, the company will continue to invest $15 billion in new mine development. In addition to the Xipo project, Rio Tinto's development focus includes the Rhodes Ridge project, which also belongs to the Pilbara region, and the Simandou iron mine located far away on the African continent.
Rio Tinto approved a $77 million pre feasibility study last year to advance the development of the Rodling project, which has over 6 billion tons of mineral resources and an average grade of over 62%, with the potential to produce over 100 million tons of high-quality iron ore annually.
Iron ore grade refers to the percentage of iron content in iron ore, with higher numbers indicating better quality of iron ore.
The Simandou iron mine is located in the southeastern part of Guinea, with an average grade of over 65% and an initial production capacity of 120 million tons of high-quality iron ore. In the Simandou iron ore project, China Baowu has also engaged in deep cooperation with Rio Tinto to jointly build infrastructure such as railways and ports for transporting iron ore.
Qiao De said that these newly developed iron ore projects will compensate for the 15 million to 20 million tons of annual production reduction caused by the depletion of existing mining resources in Pilbara.
Rio Tinto has been operating iron ore projects in the Pilbara region for over 50 years, managing a huge iron ore development asset in the area: 17 iron ore mines (excluding the West Slope iron ore mine), a fleet of 430 trucks, the world's largest private heavy-duty railway system with a mileage of 1900 kilometers, and 4 port terminals.
Every day, this mining giant mines 1 million tons of iron ore in the region, enough to fill a standard sports stadium. These iron ores are transported by railway from mines to ports and sent to various parts of the world by ocean going cargo ships, providing essential raw materials for local steel smelting.
Qiao De said that Rio Tinto attaches great importance to operating its existing iron ore assets in the best way possible, and operating costs are one of the key areas of focus for the company.
Rio Tinto's current mining costs for iron ore in the Pilbara region range from $21.5 to $22.5, and the company is committed to further reducing costs through a series of measures.
The heavy-duty railway system operated by Rio Tinto in the Pilbara region has been fully operational since 2019 with an automated train railway system called AutoHaul, making it the only mining company in the world to use this unmanned system for transporting iron ore.
This transportation system has an investment of 1 billion US dollars and operates over 60 trains every day. A single train consists of 3 locomotives and 240 carriages, with a total length of 2.4 kilometers, and can carry over 28000 tons of iron ore.
Rio Tinto stated that the main purpose of adopting a fully automated autonomous driving system is to improve the efficiency of train operations, rather than reducing the personnel costs of train drivers.
A train usually takes 40 hours to travel between a mine and a port. With a driver driving, it may stop 3-4 times due to the need for a shift change, with a total time of over 1 hour. After switching to autonomous driving, this part of the time spent on driver shifts can be saved.
In 2018, when the fully automated train system was first put into use, 13% of train operating time still required manual intervention. By the first quarter of 2023, this proportion will decrease to 2%, and full automation has been basically achieved.
The automatic train system is remotely monitored by operators from Rio Tinto's operations center located in Perth, Australia, which is approximately 1500 kilometers away from the Pilbara region.
In the mining area of Pilbara, Rio Tinto has 361 autonomous trucks used to transport iron ore between facilities such as mines and crushing stations. Rio Tinto conducted experiments on autonomous trucks in 2007, with partners including two construction machinery manufacturers, Komatsu and Caterpillar.
These massive structures, measuring 14 meters in length, 8 meters in width, and 9 meters in height, weigh up to 300 tons and can carry 240 tons of iron ore at once. After the Xipo Iron Mine is put into operation next year, there will also be 28 unmanned trucks operating on this newly built mining project.
As the world's largest steel producer, China is the most important destination for iron ore in Rio Tinto's Pilbara region. Rio Tinto has been supplying the first batch of iron ore to the Chinese market for over half a century since 1973. As of July this year, the total amount of iron ore shipped to China has reached 4 billion tons, enough to build 23000 Bird's Nest National Stadium.
During his visit to China in May last year, Qiao De publicly stated, "China is a crucial market for Rio Tinto, and Rio Tinto will ensure stable and sustainable iron ore supply to China for a long time to come through necessary investments
China is Rio Tinto's largest regional market in the world, with nearly 60% of its revenue coming from China last year.
In the aforementioned interview, Qiao De also commented on the prospects of the Chinese steel market, stating that with the increasingly mature development of the Chinese economy, the Chinese steel market has been maturing in the past five years, which is consistent with the development process of many other countries.
In 2023, China's crude steel production will be 1.019 billion tons, unchanged from the previous year. In the first half of this year, crude steel production was 530 million tons, a year-on-year decrease of 1.1%.
At first, the demand for steel was huge, but as time went on, it tended to stabilize. I think this is a normal process, "said Qiao De. The demand for steel in China's real estate industry gradually declined, but in the production and manufacturing industries, especially in the energy transformation field, there has been a significant increase in demand for steel, such as electric vehicles, wind turbines, and other fields.