Rio Tinto’s innovative mine-gate iron ore sales arrangement with Iron Ore Holdings for a new Pilbara mine

Rio Tinto, through its Hamersley Iron subsidiary, and Iron Ore Holdings Limited (ASX: IOH) agreed today on commercial terms for an innovative mine-gate sales arrangement. Under the arrangement, Rio Tinto would purchase iron ore from a new IOH mine at Phil’s Creek, 90 kilometres from Newman.

Once the feasibility of developing the Phil’s Creek deposit is proven, the mine would be owned and operated by IOH, and Rio Tinto would purchase the supplied iron ore and transport it for sale to its customers. IOH would deliver the ore to the Yandicoogina stockyard, where Rio Tinto would assume ownership. The mine would produce an estimated one to 1.5 million tonnes a year.

Rio Tinto Iron Ore chief executive Sam Walsh said the agreement was an innovative solution that suited both parties.

“This commercial agreement represents an excellent opportunity for Rio Tinto to gain access to extra tonnage, and importantly, in a way that does not jeopardise the efficiency of our fully integrated production system.”

“It also enables IOH to develop a small resource that would face large capital costs on a stand-alone basis and most likely remain undeveloped,” he said

Mr Walsh said: “The output from this proposed mine is less than one per cent of our total Pilbara production. With our exponential growth from 220 to 320 million tonnes per year and beyond, and infrastructure expansions possibly preceding mine supply, we can stockpile the ore to capitalise on rail and shipping opportunities as they arise.”

“Importantly, it demonstrates our preferred alternative to the growing demands from Government and industry for access to our rail infrastructure. The agreement is commercially-based and balances the risks for both parties,” Mr Walsh said.

The Phil’s Creek deposit comprises 8.3 million tonnes of Indicated Mineral Resources grading 58.1%Fe, which IOH has reported in accordance with the 2004 JORC code.1 The deposit is pisolite ore situated only five kilometres from Rio Tinto’s Yandicoogina mine, the largest iron ore mine in Australia.

The proposal requires the approval of the Western Australian Government.

1Source: IOH Quarterly Activities Report, 30 April 2007.

About Rio Tinto
Rio Tinto is a leading international mining group headquartered in the UK, combining Rio Tinto plc, a London and NYSE listed company, and Rio Tinto Limited, which is listed on the Australian Securities Exchange.
Rio Tinto’s business is finding, mining, and processing mineral resources. Major products are aluminium, copper, diamonds, energy (coal and uranium), gold, industrial minerals (borax, titanium dioxide, salt, talc) and iron ore. Activities span the world but are strongly represented in Australia and North America with significant businesses in South America, Asia, Europe and southern Africa.

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