Rio Tinto and Gina Rinehart’s Hancock Prospecting commit $2.5b towards extending Hope Downs iron ore project

Australia’s most prolific iron ore miner and the country’s richest person have agreed to invest a total of $US1.6 billion ($2.5b) to keep the Hope Downs mining operation in the Pilbara alive.

Rio Tinto and Gina Rinehart’s Hancock Prospecting are contributing an equal share to bring the Hope Downs 2 and Bedded Hilltop iron ore deposits into production.

Rio said the “above-water-table” iron ore pits have an annual production capacity of 31 million tonnes and will sustain production from the Hope Downs joint venture “into the future”.

Ore mined at the two sites will be transported to Hope Downs 1 for processing, with first ore from the two new deposits scheduled for 2027.

More than 950 jobs will be created during construction, according to Rio, and once operational the Hope Downs 2 project “will help sustain” a workforce of about 1000 full-time equivalent roles in the Greater Hope Downs mining area.

The Hope Downs funding commitment comes less than a month after Rio formally opened the $3.1b Western Range iron ore mine.

At Rio’s annual general meeting last month, chairman Dominic Barton flagged a $20b spend on new mines, plant and equipment in the Pilbara over the next three years to keep its annual iron ore output from the region above 300mt.

The miner is making up for lost time after facing regulatory hurdles bringing new projects online in the immediate wake of the Juukan Gorge disaster five years ago.

A dearth of new supply has made Rio increasingly reliant on extracting lower-grade ore in recent years, squeezing the company’s profit margins.

“Approval of Hope Downs 2 is a key milestone for Rio Tinto, as we invest in the next generation of iron ore mines in the Pilbara,“ Rio Tinto iron ore chief executive Simon Trott said on Tuesday.

“These projects are part of our strategy to continue investing in Australian iron ore and to sustain Pilbara production for decades to come, supporting jobs, local businesses and the State and national economies.

“The Pilbara has been critical to global steel supply for more than 60 years, and we are committed to ensuring it remains so well into the future.”

Rio’s next priority is its $US6.2b portion of the ultra high-grade Simandou mining complex in Guinea, where first ore is scheduled in the first half of next year.

Then back in its Pilbara heartland, Rio also plans to extend the Nammuldi and Brockman mines while also bringing the massive Rhodes Ridge project to life by 2030.

Rio in March committed $US1.8b towards Brockman and a month prior the Rhodes Ridge project got a shot in the arm after the Wright family sold their 40 per cent stake to Japanese trading house giant Mitsui & Co for $8.4b.

The ore from Rio’s various Pilbara mines gets blended and from next year will also be mixed with Simandou’s ore, before being sold to steel mills in China.

Shares in Rio were up 2.6 per cent to $104.42 by 9.30am.