Rio Tinto says that it remains on course to achieve its mid-term iron ore output targets in spite of the fact that it will defer its decision of its investment in Silvergrass until the third quarter of 2015 at the earliest. Silvergrass is the proposed billion dollar greenfield iron ore mine project located in the Pilbara.

The company told an investor seminar in Sydney on 27 November that it would reinforce its focus on productivity and driving value from its iron ore assets in the Pilbara. The deferment would not affect the iron ore production forecasts currently in place. Rio Tinto still expects to achieve the delivery of 330 million tonnes in 2015 and 350mt by 2017. The extra production necessary to hit these targets will come from “…brownfields, debottlenecking and productivity across the Pilbara mine network”.

The ramp-up to 360mt will create the best value for Rio Tinto shareholders, the company says. For almost 50 years, the Pilbara assets have produced an average Ebitda margin of 50% and the 360 project positions the business for industry-leading returns over the long term. Shareholders stand to benefit from the very considerable value that this will generate, Rio adds.

This is not the first time that Silvergrass has been deferred. Exactly 12 months ago the company announced a similar postponement of the investment decision to Q3 2014 at the earliest. And that was when the iron ore price was $137/tonne, nearly twice the current level, Kallanish observes.

The announcement comes at the same time as a similar declaration by Fortescue Metals (see related article).