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MELBOURNE - Rio Tinto Group, the world's third-largest mining company, has postponed a US$2.15 billion ($3.67 billion) expansion of the Corumba iron ore mine in Brazil because of a decline in demand for the ingredient used to make steel.
"It has been postponed in response to the severe market downturn resulting from the financial crisis," Gervase Greene, spokesman for London-based Rio, said yesterday from Perth.
"We retain the option of resuming the expansion when credible signs of a market recovery are seen."
The global recession has curbed demand for steel, prompting mills in Asia, Europe and North America to slash purchases of raw materials.
Rio is cutting 14,000 jobs worldwide and slashing US$5 billion in spending to help reduce debt and conserve cash.
Difficulties obtaining funding for the expansion and falling demand for iron ore led to the decision, the Folha de S.Paulo newspaper reported last Saturday, citing Rio finance director Aloisio do Pinho Oliveira.
Expanding the Corumba mine would have increased output capacity more than five-fold to 12.8 million tonnes a year, London-based Rio said last year. It was also planning to conduct a study to expand the mine further to 23.2 million tonnes.
Rio shares fell A$2.63 to A$41.30 on the Australian stock exchange
yesterday.
- BLOOMBERG
