Rio Tinto bets on future of automated mining

MELBOURNE Mon Feb 20, 2012 8:19am GMT

A train loaded with iron ore travels towards the Rio Tinto Parker Point iron ore facility in Dampier in the Pilbara region of Western Australia April 20, 2011. REUTERS/Daniel Munoz

A train loaded with iron ore travels towards the Rio Tinto Parker Point iron ore facility in Dampier in the Pilbara region of Western Australia April 20, 2011.

Credit: Reuters/Daniel Munoz

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MELBOURNE (Reuters) - Global miner Rio Tinto has accelerated a move toward automation, unveiling a $518 million (327 million pound) plan to pioneer the use of driverless trains in Australia and increasing its bet on a future where machines rather than miners do most of the work.

The world's no.2 iron ore miner, which already has driverless trucks, plans to run fully automated trains across its 1,500 km (930 mile) iron-ore rail network in northwest Australia from 2014, to help boost output 60 percent by 2015.

The re-fitted trains will be operated like a space mission from a control room in Perth, 1,500 km away, from where Rio now runs the driverless trucks.

"This is not just about job losses. That's not what this is about. This is about us remaining competitive," Greg Lilleyman, president of Rio Tinto's Pilbara operations, said on Australia Broadcasting Corp radio after the announcement on Monday.

Rio says it wants to avoid forcing workers to toil beneath the scorching heat of the Pilbara, a desert region that ranks among the world's richest iron ore precincts, but automation also enables it to overcome a shortage of skilled labour.

The shortage has been fuelled by a record boom in mining and energy investment, with $230 billion worth of projects underway or approved in Australia. Salaries have skyrocketed to the point where a truck driver can earn more than $100,000 a year.

At least half of Rio Tinto's 500 train drivers may lose their current jobs, with the rest to be used on about one-fifth of the network that will still need drivers. But Rio says no one will be laid off as it aims to retrain workers for new roles.

Trade unions oppose automation, but their influence in the Pilbara has waned as Rio and other miners such as BHP Billiton (BHP.AX) have switched over the years to individual contracts or contract labour.

"The company's objective of lowering labour costs is the wrong way forward," said Gary Wood, Western Australia district secretary for the mining and energy arm of the Construction, Forestry, Mining and Energy Union.

He said hundreds of jobs were at stake.

"This decision that's being made isn't based on people. It's based on shareholders, and international shareholders at that," he told Reuters.

Rio has long dreamed of automating its trains, but put the plan on hold during the global financial crisis in 2008 when it struggled with a massive debt burden from its takeover of Alcan.

Other miners, including BHP (BLT.L), are watching how Rio's experiment pans out and have yet to follow suit.

Rio says it is still expanding its overall Pilbara workforce and will need thousands of new workers, on top of the 10,500 it already employs, to boost iron ore production to 353 million tonnes a year by 2015 up from 220 million tonnes now.

It will need more people to perform maintenance on trucks, trains and other heavy equipment, manage rail and port schedules, operate the control centre, and run trains around about a fifth of its network.

By getting rid of drivers, Rio will no longer have to slot in times for driver changeovers, giving it more flexibility in scheduling trains and creating more capacity in the network.

"Automation will help us meet our expansion targets in a safe, more efficient and cost-effective way," Rio Tinto iron ore chief Sam Walsh said in a statement.

The company did not say how much it would save by switching to driverless trains, but said the benefits would stem from the distances and loads involved. It runs 2.5 km-long trains, each carrying about 25,000 tonnes of ore.

But the numbers add up quickly, as each roundtrip to port from the mines takes about 30 hours, with three or four drivers on each train, and each driver working an eight-hour shift.

Rio has no plans to roll out similar remote-controlled technology at other mines yet, spokeswoman Karen Halbert said.

Rio's share of the investment is $478 million, with the remainder to be covered by its Japanese partners in the Robe River operations in the Pilbara -- Mitsui (8031.T), Nippon Steel (5401.T) and Sumitomo Metal Industries 5405.T.

(Reporting by Sonali Paul; Editing by John Mair)

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