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

The Amrun project is about 40 kilometres south of Rio Tinto’s existing East Weipa and Andoom mines on the Cape York Peninsula in far north Queensland.

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“Amrun is one of the highest quality bauxite projects in the world”, Rio Tinto chief executive Sam Walsh said.

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.

The expansion project involves construction of a bauxite mine as well as processing and port facilities on Queensland’s Cape York Peninsula.

Rio Tinto said that the project’s design provides future expansion of production to 50 million tonnes per year.

Walsh noted that Amrun would “certainly achieve” more than the company-wide internal rate of return benchmark of 15 percent.

“We are seeing a great interest by a number of Chinese players”, Alf Barrios, Rio’s chief executive officer of aluminium, said on Friday in a phone interview from Brisbane.

Queensland Premier Annastacia Palaszczuk said it would be the single largest private investment outside the southeast of Queensland in “many many years”.

China’s imports may more than double to 104 million tons a year by 2025, Alumina Ltd said in an Aug 19 filing, citing CM Group research.

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.

“The commission is satisfied that the mine complex’s significant benefits outweigh its potential impacts”, the New South Wales state Planning and Assessment Commission said in a statement, echoing a preliminary decision from last month.

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Still, the go-ahead from PAC will likely reinforce Rio’s attempts to sell its Hunter Valley assets, which are valued at about $3.5 billion. Aboriginal and Torres Strait Islander people make up around 24 per cent of employees and the Amrun project will continue creating opportunities for indigenous people from Cape York and the surrounding region. Rio Tinto is the world’s second-biggest bauxite miner and bauxite is the essential input for producing aluminum. Year-to-date, the stock is some 25 percent in the red.

Rio Tinto CEO Sam Walsh at a mining tax conference at Melbourne's Grand Hyatt