Rio Tinto Awards $175.5 Million Pilbara Iron Ore Mining Contract to NRW-East Guruma Joint Venture

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Researched by Industrial Info Resources (Sugar Land, Texas)--In a recent development, global mining major Rio Tinto plc (NYSE:RTP) (London, England) has awarded a contract for operating its Pilbara iron ore mines. The $175.5 million contract has been secured by a joint venture between native Eastern Guruma title holders and mining services company NRW Holdings Limited (ASX:NEW) (Welshpool, Australia). The contract will ensure that the local indigenous communities share the wealth created by mining and its associated activities in the region. NRW Holdings Limited is a leading name in Australia's mining and civil construction services sector.

The scope of the four-year contract includes construction, mining and transportation of ore from the Western Turner Syncline deposit in the Pilbara region to Rio Tinto's processing facility at the town of Tom Price. The joint venture also will build 15.5-kilometer roadway that will help in the transportation of ore to the processing unit. Sources have indicated that this contract is one of the most significant commercial achievements for the Eastern Guruma community. It also reinforces Rio Tinto's commitment toward including indigenous title holders and contractors in its mining operations in the Pilbara region. At the Tom Price facility, the ore from the Western Turner Syncline mine will be processed and blended with other iron ore grades. Construction is likely to begin after the final regulatory approvals are received. Production at the mine has been scheduled for July 2010. Experts have indicated that the mine will produce 6 million tons per year of high-quality ore, with iron content of more than 60%.

The Western Turner Syncline deposit is about 25 kilometers from Tom Price. Project officials indicate that while the ore mining and haulage activities would span over 3.5 years, the construction of roadways and allied infrastructure would be completed in four months. In 2008, Rio Tinto allocated funds of $149 million to perform feasibility studies and exploration of the Western Turner Syncline mine. About $18 million was spent on feasibility studies, while $55 million and $76 million were used for heavy equipment procurement and construction of facilities, respectively. The feasibility studies were conducted on three deposits located at a distance of 20 to 35 kilometers from Tom Price. As of June 2008, the deposits were reported to have combined reserves of 298 million tons.

Rio Tinto officials have stated that the four-year contract also will increase Eastern Guruma title holders' stake in the joint venture to 35%. Subsequently, there is a provision for both parties to hold a 50% stake each in the joint venture. Currently, the Eastern Gurumas hold a 25% stake in the venture. During the contract period, the project is expected to provide employment opportunities and improve financial and economic levels in the region. Rio Tinto is expected to invest $5.26 million in training the Eastern Gurumas community and developing their competency in mining services.

The Pilbara region holds a key position on Rio Tinto's global mining map. The company is likely to increase its production capacity in the area from 220 million tons per year to 230 million tons per year. During this fiscal year, Rio Tinto invested about $96.5 million in Pilbara, utilizing the services of indigenous contracting agencies. Of this investment, $43.89 million was spent on activities through companies associated with Pilbara Aboriginal Contractors Association (Karratha, Australia). Rio Tinto also has invested $9.21 million toward training and developing educational services for aboriginal communities in the region. Rio Tinto, which employs about 650 people from these communities, is the largest non-government indigenous community employer in the region.

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