From: Reuters
Published December 17, 2007 07:07 AM

Rio to invest $1.1 bln in Australian, U.S. mines

By James Regan

SYDNEY (Reuters) - Rio Tinto <RIO.AX> <RIO.L> said it was to invest $1.1 billion expanding mines in Australia and the United States, as it looks to internal growth to fight off an unwanted approach from rival BHP Billiton.

Rio said it would spend $793 million as its 80-percent share of the cost to extend the Kestrel coal mine in Australia.

Rio also said it was to invest $300 million developing Eagle, a high-grade nickel and copper mine in Michigan, United States, projected to deliver 16,000 tons of nickel per year over seven years until 2016.

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It is also in final contract negotiation to develop a nickel mine at Sulawesi in Indonesia, and forecast an initial operation of 46,000 tons per year with first production commencing by 2015. "There is additional potential at Sulawesi of a similar size," it said.

The total cost of the work at the Kestrel mine in the coal-rich Bowen Basin region of Queensland state, aimed at increasing productivity when existing sections of the mine start showing signs of depletion in about four years, was $991 million, Rio said on Monday.

Rio holds an 80 percent stake in the mine. Mitsui Kestrel Coal Investment, which is owned by Japan's Mitsui Group <8031.T> holds the other 20 percent.

The work will allow for annual production of around 5.7 million tons of coal until 2031, Rio said.

"This represents a further 20-year commitment to the Bowen Basin and is a strong vote of confidence in the Asian coal market," the company said.

The work will provide access to 112 million tons of high quality hard and semi-hard coking and thermal coal for export, it said.

Once coal seams are found, mining teams work to estimate the quantity, quality and depth of coal in the area.

After being mined, the coal is transported to handling facilities where it is sized, blended and loaded into trains according to customer specifications.

Finally, the coal is taken to power plants, mills or sold in the international market.

So far this year, Rio Tinto has spent $44 billion on new projects, including its $38.1 billion acquisition of Alcan in October

Rio is the subject of an unsolicited $120 billion takeover proposal from rival BHP Billiton Ltd/Plc <BHP.AX> <BLT.L>.

Rio Chief Executive Tom Albanese this month stopped short of saying Rio was not for sale at any price, but reiterated that BHP's three-for-one share proposal was well below what he thought Rio was worth.

After the Alcan acquisition, Rio would turn more toward organic growth, according to Albanese.

Rio shares were down 2.5 percent at 5,045 pence in London by 1153 GMT, having closed 3.9 percent lower at A$131.85 in Australia.

(Additional reporting by Dan Lalor in London; Editing by Louise Ireland)

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