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Australian iron ore miners gear up for projects, studies as prices rally

On the back of resilient prices and after holding off on CapEx, Australia's iron ore industry is gearing up to sign off on new projects and studies in the next year to replace aging mines, The Australian wrote Dec. 12.

Over 135 million tonnes of iron ore production capacity representing new investment of more than A$7 billion is set to either begin construction or come under consideration in 2017, according to data compiled by the publication.

Rio Tinto will start major works on its A$453.7 million Silvergrass iron ore project, part of the Hamersley Consolidated operation, while Fortescue Metals Group Ltd. will decide on developing the Nyidinghu or Eliwana deposits as a replacement for its 27 million-tonnes-per-year Firetail mine.

Meanwhile, BHP Billiton Group's South Flank development is expected to remain subject to ongoing studies given that the company will be focusing on its Spence copper mine in Chile, and Mad Dog oil and gas developments over the next year. South Flank is deemed critical to maintaining BHP's iron ore business once its Yandi operation shuts down.

In addition, Mount Gibson Iron Ltd. received ministerial approval for its Iron Hill mine in Western Australia's Midwest, which is expected to start production in the first half of 2017.

The progress on the development of new iron ore mines comes despite ongoing uncertainty over Nationals leader Brendon Grylls' proposed A$5 per tonne tax on iron ore production, which would initially apply to BHP and Rio Tinto. Both have argued that the additional levy could risk future investment in the sector.

The likelihood of the tax being implemented will become clearer at Western Australia's election next March.