Kestrel costs soar

DELAYS and scope changes at Rio Tinto’s ambitious Kestrel extension in Queensland accounted for 30% of the rise in costs for the project, which has now been put at $US2 billion.
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Rio Tinto's Kestrel face.

Lou Caruana

The investment, which will extend the life of the mine to 2031 and is expected to come onstream in the second quarter of 2013, rose from Rio Tinto’s initial budget of $1.1 billion.

Rio Tinto attributes the remaining causes of the cost overrun to increases in exchange and higher inflation.

The project is expected to deliver Rio a production boost from 4.3 million tonnes per annum to 5.7Mtpa.

Despite the Kestrel setbacks, higher commodity prices helped Rio Tinto Coal Australia report an impressive $6.1 billion revenue for the year to December 31, 2011, up from $4.6 billion for the previous corresponding period.

Earnings before interest, tax, depreciation and amortisation for the year came to $2.3 billion compared to the $1.7 billion for the previous period.

The Australian coal operations recovered substantially from the severe weather conditions of the first half of 2011 but production levels overall were down on 2010.

Hard coking coal, semi-soft coking coal and thermal coal production for 2011 was lower than 2010 by 2%, 7% and 3% respectively.

Rio Tinto completed the acquisition of Riversdale Mining (now Rio Tinto Coal Mozambique) on August 1, delivering new options for growth in thermal and coking coal in Mozambique.

First production from the Benga mine is expected to be processed through the wash plant in the early part of the first quarter, with the first shipment of hard coking coal from the Beira port expected around the end of the first quarter.

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