Rio Tinto chief executive Jakob Stausholm says miner to keep calling Australia home

Rio Tinto chief executive Jakob Stausholm has poured cold water on fears the $9.5b “Pilbara Killer” Simandou in mine in west Africa will do as its unofficial nickname suggests.

Speaking to The Nightly after handing down results for the half-year, the Anglo-Australian miner’s CEO said he didn’t think the new high-grade iron ore mine in Guinea, due to start producing in 2025, would undermine its anchor operations in Australia.

There are also concerns the flood of new supply could push down prices.

But he said iron ore grades from the North West of WA were on the decline, and that there was a huge demand to be met for a premium product even though industrial growth in China had tempered.

“The world’s pre-eminent place for producing iron ore has been, and will be in the future, the Pilbara,” he said.

“But, of course, what is happening is that many of us have extracted iron ore there for 50-60 years, and the grade is not as high as it was. Rio is at an advantage to get Simandou because we can either sell (into) a different segment, namely the high grade segment, or we can blend it with the Pilbara ore and therefore get a higher grade.”

He said there would be “enormous demand” in particular for high-grade ore to develop so-called green steel.

In WA, Rio is more than halfway through building its majority owned $3.1b Western Range mine, which will be the next Pilbara cab off the ranks.

Environmental documents for the Rhodes Ridge mine to be developed thereafter were filed in February, and the mine could potentially be producing by the end of the decade.

On the bigger picture, he said there was “no doubt” China’s property slowdown was flowing through to steel demand, but shared a similar sentiment to Fortescue and BHP in believing that there were other areas of industry hungry for steel.

Mr Stausholm was also bullish about industrial growth prospects in India.

It comes as a train collision earlier this year cost Rio Tinto six days of capacity and put a 10 per cent dent in its iron ore earnings for the first half of the year, in what was an otherwise stable performance for the world’s biggest miner.

An AutoHaul train laden with iron ore rammed into the back of a locomotive being repaired about 80km from Karratha in May, marking Rio’s third autonomous train derailment in WA within 11 months.

The near week-long clean-up set back shipments by about 2 per cent to 158.3 million tonnes, compared to 161.7mt it had exported by this time last year.

That — combined with a slightly weaker price for the steelmaking commodity — lost Rio 10 per cent from the powerhouse division’s underlying earnings before interest, tax, depreciation and amortisation, which were down to $US8.8 billion ($13.4b) from $US9.7b ($14.8b).

Despite the incident Rio has stuck to its guidance for the full year of between 323mt and 338mt.

Rio held its first-half payout to investors steady after booking only a marginal rise in underlying earnings as the company proved broadly resilient to China’s economic slowdown and property crisis.

In what the miner described as a “consistent, stable financial performance”, it delivered underlying earnings of $US12.1 billion — up 3 per cent — for a profit of $US5.8b, which was up 14 per cent from a year earlier.

That was just below the median analyst estimate of $US5.89b. Rising operating costs of 3.5 per cent were offset by easing prices for diesel and natural gas. Shareholders will collect $US1.77 a share.