MELBOURNE (Reuters) - Rio Tinto, the world’s No. 2 iron-ore miner, gave the long-awaited green light for an “intelligent” iron ore mine in Western Australia on Thursday, raising its expected cost by nearly 20 percent from the original plan.
Approval for the $2.6 billion Koodaideri mine marks Rio Tinto’s biggest investment commitment since 2016, when it signed off on a $5.3 billion underground expansion of the Oyu Tolgoi copper mine in Mongolia.
Rio has previously called Koodaideri its first “intelligent” mine, as it will be using systems that connect driverless trucks, trains and drills for the first time, using data analytics to optimize production, improve safety and cut downtime.
“Koodaideri is a game-changer for Rio Tinto. It will be the most technologically advanced mine we have ever built and sets a new benchmark for the industry,” Chief Executive Jean-Sébastien Jacques said in a statement.
Costs for Koodaideri, due to start producing in 2021, have risen as Rio expanded the planned capacity to 43 million tonnes from 40 million tonnes and added an airport, new roads and safety features to the project.
Rio Tinto said rising labor and materials costs had also added to the original cost estimate of $2.2 billion. It expects construction will involve more than 2,000 people.
The project will be competing for workers and equipment in the iron-rich Pilbara region, where rivals BHP Group and Fortescue Metals Group are also digging new mines.
Koodaideri is expected to underpin Rio’s production of its flagship Pilbara Blend iron ore, sustaining its current output of more than 330 million tonnes a year.
It is still considering a second phase to expand the mine to more than 70 million tonnes.
Rio Tinto’s shares jumped 3 percent in early trade on Thursday, outperforming the broader market and BHP, but just behind Fortescue.
Reporting by Ambar Warrick in Bengaluru and Sonali Paul in Melbourne; Editing by Eric Meijer