August 30, 2010 / 8:39 AM / 10 years ago

UPDATE 1-Rio Tinto approves $1.6 bln for new iron ore mine

* Rio’s share of project $1.32 bln

* Funds also pay for new port, rail and power infrastructure

* JV partner Hope downs to shoulder part of mine cost

* Comes as Rio and BHP await word on larger jv in sector (Adds detail)

SYDNEY, Aug 30 (Reuters) - Rio Tinto (RIO.AX) (RIO.L) on Monday signalled it was pushing ahead with its expansion plans in iron ore while it awaits competition authority clearance to form a partnership with rival BHP Billiton (BHP.AX) in Australia.

The world no. 2 producer of the steel making raw material said it had approved $1.6 billion to expand its Hopes Downs iron ore mine project in Australia with a local partner.

The new open-cut mine will have an annual capacity of 15 million tonnes of high-quality iron ore, with first production anticipated in 2013, the company said in a statement.

The size of the project is a far cry from the 155 million tonnes the joint venture with BHP would immediately deliver, but underscores Rio Tinto’s aim to expand with or without BHP.

“This demonstrates the extensive high-grade resources Rio Tinto can bring on line to sustain our current output at 225 million tonnes a year, an equally important consideration as we seek to expand our Pilbara production rate to 330 million tonnes a year by 2015,” Rio Tinto’s iron ore chief executive, Sam Walsh said in a statement.

Rio Tinto’s share of the cost to develop the mine will be $1.32 billion — $607 million to construct the mine and $425 million to build rail, port and power infrastructure.

Joint venture partner Hope Downs Iron Ore Pty Ltd put up the remaining cost for developing the mine, but will not provide funds for infrastructure, according to Rio Tinto.

Rio Tinto and BHP BLT.L are hoping to form the joint venture valued at $116 billion to formalise production sharing arrangements in Australia.

Regulators in Europe, Australia, China and other jurisdictions have yet to rule on the tie-up amid speculation it is only a matter of time before the deal falls over.

Both companies have said they continue to pursue the joint venture announced over a year ago but have expressed frustration over the lengthy approval process.

Rio Tinto has since moved to form a joint venture with China’s Chinalco (2600.HK) (601600.SS) to develop the Simandou iron ore mine in Guinea, while BHP has launched a $39 billion hostile bid for fertiliser miner Potash Corp POT.T.

Analysts still see regulators in Europe as the biggest obstacles to a Rio Tinto-BHP partnership due to opposition there from steel producers.

They fear the two together, producing more than 350 million tonnes a year of iron ore to overtake Brazil’s Vale VALE5.SA and handling a third of global seaborne trade in iron ore, would have too much control over prices.

The EU has not set a date for finalising its review. BHP and Rio have said they hope to get the approvals they need by the end of 2010. (Reporting by Jim Regan; editing by Balazs Koranyi)

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