Rio Tinto Signs AU$200-million Iron Ore Towage Contract in Pilbara

Rio Tinto (ASX,LSE,NYSE:RIO) has signed a AU$200-million long-term contract with Perth-based Westug to provide towage services at the company’s Cape Lambert and Dampier iron ore ports in the Pilbara, Western Australia.

The contract is set to last five years and covers the four terminals at Rio’s two ports in the area. Last year, these ports shipped a grand total of 330.1 million tonnes of iron ore.

Westug’s responsibilities under the contract are to maintain and operate Rio’s tug fleet, which comprises 11 vessels and four smaller crafts. According to Rio, the contract will help sustain over 130 jobs.

“Towage operations and vessel maintenance are a critical element in our supply chain. Rio Tinto has a long history of working with Westug at our ports and this new contract is an endorsement of both the value and opportunity available in the next phase of our relationship,” Rio Tinto iron ore managing director rail, port and core services Ivan Vella said in a statement.

Through the contract, Westug has also agreed to an “enhanced local procurement strategy”, where the main focus will be boosting the relativity of Pilbara specific spending and maximizing its footprint in the local community.

“Importantly, Rio Tinto’s values around local procurement align with those of Westug’s and we look forward to seeing the benefits of this approach flow through to local businesses and workers in the Pilbara,” Vella said.

Rio’s iron ore operations in Western Australia include 1,700 kilometres of rail, 16 mines and four port terminals. The company’s most recent iron ore mine, Silvergrass, opened in late August 2017, with the project’s price tag coming in at US$338 million.

It is now in the process of ramping up to its 21 million tonnes per year capacity, while currently running at an annualized rate of 15.3 million tonnes per year at the end of 2018’s first quarter.

Rio closed 1.79 percent down on the ASX on Wednesday (July 11), at AU$80.16.

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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.