MINING giant Rio Tinto will spend $ 400 million to expand its Pilbara iron ore production capacity to 360 million tonnes per annum.
Mine production capacity will increase by more than 60 million tonnes a year between 2014 and 2017.
The rapid expansion is expected to be achieved through boosted production at existing mines, productivity gains and the development of the Silvergrass mine.
“The majority of the low-cost growth will be delivered in the next two years with mine production of more than 330 million tonnes in 2015,” Rio said in a statement.
Rio plans to reach a run-rate capacity of 290 million tonnes per annum (mtpa) by the end of the first half of 2014 after completing the first phase of its expanded port rail and mine operations.
The second phase of expansion of the port, rail and power infrastructure to get to 360 mtpa is expected to be completed in the first half of 2015.
Rio recently said it was confident of hitting its 2013 iron ore production target of 265 million tonnes.
But Rio has deferred an investment decision on Silvergrass until the third quarter of 2014, and a decision on the proposed Koodaideri mine has been deferred until 2016.
It comes after Rio targeted a reduction of $ US5 billion ($ A5.49 billion) in its overall operating cost cuts by the end of 2014.
Chief executive Sam Walsh said the expansion of the company’s Pilbara operations represented the most attractive investment opportunity in the sector.
“It’s in line with my commitment to be totally focussed on only allocating capital to opportunities that will generate the best returns to shareholders,” Mr Walsh said in a statement.
The expansion would be delivered at an estimated capital cost of more than $ 3 billion below previous expectations, he said.
Analysts were expecting $ US5 billion to be allocated on an iron ore expansion to achieve 360 million tonnes a year.
The expansion is subject to government and joint venture approvals.