ON THE eve of its quarterly production report, Rio Tinto revealed yesterday that it would halt work on a $US1.5 billion ($2.2 billion) underground development at its Argyle diamond mine in Western Australia that was more than half finished.
It was the fourth big project cancellation in three days, after similar moves at its $US2.1 billion Corumba iron ore project in Brazil, a $US160 million underground expansion at its Northparkes copper mine in NSW, which was 75 per cent complete, and a $US371 million plan to automate its trains in the Pilbara.
Lower commodity prices and its need to repay $US8.9 billion of debt by October has forced Rio to defer most of its growth projects - even those more than half complete - indefinitely.
Talk of developing ambitious greenfields projects in riskier regions such as its Simandou iron ore project in Guinea and its Oyu Tolgoi copper-gold project in Mongolia has all but disappeared since BHP Billiton pulled its bid in November.
Instead, last month Rio said it would undertake a company-wide review of its projects, resulting in an expected 14,000 job cuts across the globe and $US5 billion in savings on expansion projects this year.
Before yesterday's announcement, there were usually about 1400 employees and contractors on site at Argyle. The underground postponement will leave fewer than 100 Rio employees out of work but the lead contractor, Macmahon, will slash 220 positions.
Macmahon said its annual contract revenue at Argyle would fall to just under $20 million, down from $80 million, until full development activities resumed.
Rio will continue to operate the open-cut mine, which is nearing the end of its life, but it will slow the production rate and shut the processing plant for three months of maintenance work starting in March.
Rio will release its fourth-quarter production report today. It has already warned that iron ore shipments will be substantially lower. Figures from the Dampier Port Authority show its shipments at one of its two ports halved from October to November. The December figures have not yet been published.
Analysts expect Rio's coking coal shipments to have fallen. Last week the company said it would cut production at its Kestrel mine in Queensland by 15 per cent due to weak demand for the steelmaking material.
Rio shares closed 38c lower at $40.73 yesterday.
