DJ Rio Tinto CEO: Simandou Project in New Guinea on Track to Start Production by 2015
Nov 19, 2012 (Dow Jones Commodities News via Comtex) --By Yoree Koh
TOKYO--Rio Tinto PLC (RIO) Chief Executive Tom Albanese said that the mining giant's Simandou project in New Guinea was on track to begin production in 2015, and that work on the project had begun, although much still needs to be done.
"Work on the ground has begun" with early stages of engineering and developing local staff, said the head of the Anglo-Australian resources company at an event in Tokyo on Tuesday, adding that the company aims to start local production by 2015. "But of course lots of things need to work by then."
However, Mr. Albanese said he expects iron ore prices to remain volatile for the near term, and that was something the industry would have to get used to as its faces sluggish global-growth forecasts and increasing development costs.
"We're in an environment where volatility will be with us," he said. "(We) need to be ready to live with this volatility for the next couple of years."
With the industry going through a period of budget deficits and large structural changes, "these volatile conditions are not going to go away in the next year or two," he said
Yet he said he expects to see a "step-up" in demand from China for the products the company produces, such as like aluminum, copper, iron ore.
As it grapples in what appears to be the post-mining boom era Rio Tinto and its rivals such as BHP Billiton, Anglo American PLC have been forced to reassess spending plans. Most have slashed spending, reining in investment plans and shuttering mines as price prospects for major industrial commodities worsen. Rio Tinto has trimmed jobs and will shut an aged coal mine this month, adding to the mounting job losses racked up at its other mining operations. BHP Billiton said in August it would postpone or curtail projects valued at more than 50 billion. It has closed two coal mines in Queensland this year while Xstrata PLC has said it will lay off roughly 600 workers.
The squeeze on industrial commodities has hit Japan's large trading houses hard, which hold stakes in several major projects overseas. Both Mitsubishi Corp. and Mitsui & Co. earlier this month attributed big net profit drops to lower commodity prices, and have cut their full fiscal-year forecasts. Mitsubishi slashed its net profit forecast last month to Y330 billion, compared with an initial projection of a record Y500 billion.
Rio Tinto is Australia's biggest iron ore exporter. Iron ore prices plunged sharply in August and September to less than US90 a metric ton as Chinese demand for the steel-making commodity temporarily dried up. While prices have gotten a lift in recent weeks, they still hover below the year-to-date highs of about 150 a ton in April.
Write to Yoree Koh at yoree.koh@wsj.com
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11-19-12 2358ET
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