Rio Tinto PLC (RIO) has received government approval for the US$1.8 billion expansion of Australia's largest iron ore mine, a cornerstone of the company's efforts to continue raising its production of the steelmaking commodity.

 

The go ahead Friday from Western Australia state came the same day that Rio Tinto closed one of its older coal mines to the east of the country.

 

In a statement, the government said it had approved Rio Tinto's plans to extend the life of its Yandicoogina mine in the east of the iron ore-rich Pilbara region and boost output capacity to 60 million metric tons a year from 53 million tons currently.

 

"As well as creating hundreds of construction jobs, this proposal will add eight years to the life of the Yandicoogina project, providing continued employment for about 1,000 people," said Premier Colin Barnett, who added the project demonstrated the continued strength of the iron ore industry in Western Australia.

 

Rio Tinto in June said US$6.2 billion would be invested in its iron ore operations, including US$5.2 billion in the Pilbara and the remainder on a project in Guinea. The company in all has forecast capital expenditure this year of US$16 billion, a target it has maintained despite a slump in prices for industrial commodities from last year's highs.

 

"It is critical that we continue to replenish our existing production base in a timely and efficient manner, as this latest project largely does," said Sam Walsh, chief executive of Rio Tinto's iron ore business and Australian operations.

 

Rio Tinto is working to increase the annual production capacity of its mines in the Pilbara to 283 million tons by next year and to 353 million by 2015.

 

The Yandicoogina mine began production in 1998 and has become a flagship operation for the introduction of advanced mining technology by the company, including the use of a fleet of 10 driverless trucks that operate around the clock. Output at the mine is expected to peak at 60 million tons a year, then settle within two years at about 58 million tons for the rest of the decade.

 

In the coal-rich Bowen Basin of eastern Queensland state, Rio Tinto switched off its excavators and closed the gates at its Blair Athol mine after about 30 years of operation. The mine has produced almost 250 million tons of thermal coal since it opened, but the company in August said it would shut the operation rather than seek to extend the life of the mine after a fall in prices made it unfeasible to dig for poorer quality coal in harder-to-reach seams.

 

"At its peak Blair Athol mine had a workforce of more than 400 people and was an economic powerhouse for the region, producing over 12 million tons of coal a year," said Dawid Pretorius, general manager of operations in the Clermont region of Queensland.

 

Rio Tinto, like its rivals, has been cutting coal mining jobs to counter weaker prices, higher operating costs and a strong Australian dollar. Among other moves, Xstrata PLC (XTA.LN) is cutting about 600 coal jobs in the country and BHP has closed two metallurgical coal mines and withdrawn some expansion plans.(Source:Foxbusiness)