Rio Tinto (RIO-N, RIO-L) stands to be one of the biggest losers if Australia passes a proposed 40% tax on windfall profits on all operating mines in Australia and it appears the U.K.-headquartered mining giant is starting to put its investment dollars elsewhere.
Rio Tinto announced on May 6 that it was investing US$235 million in a US$401 million expansion program at the Iron Ore Company of Canada (IOC) operations, a company in which it holds an equity interest of 58.7%.
The investment will boost IOC’s annual concentrate capacity by four million tonnes to 22 million tonnes by 2012.
The investment is the first of a three-stage expansion program that could increase IOC’s annual capacity of concentrate to 26 million tonnes.
The expansion program was approved in March 2008 but suspended later that year as the global financial crisis struck international markets.
A spokeswoman for Rio Tinto in London told The Northern Miner that the timing of the investment was coincidental and had nothing to do with the proposed tax on mining profits in Australia.
“The timing is coincidental and as you know these things take a long time to get from start to finish so I think that would be an extrapolation too far,” Faeth Birch of Rio Tinto’s media relations department explained. “Rio Tinto has obviously got a lot of options and they think the IOC is a very strong expansion and stands up in its own right. It was coming up for approval anyway.”
IOC chairman and chief executive of Rio Tinto’s iron ore division, Sam Walsh, said the move highlighted the company’s confidence in the iron ore market, the attractiveness of investing in Canada, and the quality and potential of IOC’s assets.
“Some uncertainty and potential volatility remain about global economic recovery, but global iron ore and steel markets have rebounded strongly and demand growth looks set to continue,” he said in a prepared statement.
IOC is the largest manufacturer of iron ore pellets in Canada and its customers are steel producers across North America, Europe, and Asia.
The company operates a mine, concentrator and a pelletizing plant in Labrador City, Newfoundland and Labrador, as well as port facilities in Sept-Iles in Quebec. It also operates a 418-km railroad that links the mine to the port.