Bloomberg reported that Rio Tinto has postponed USD 2.15 billion expansion of the Corumba iron ore mine in Brazil because of a decline in demand for the ingredient used to make steel.

The report cited Mr Gervase Greene spokesman of Rio as saying that “It has been postponed in response to the severe market downturn resulting from the financial crisis. We retain the option of resuming the expansion when credible signs of a market recovery are seen.”

Newspaper Folha de S.Paulo citing Mr Aloisio do Pinho Oliveira Rio finance director reported on January 10th 2009 that difficulties obtaining funding for the Corumba expansion and falling demand for iron ore led to the decision.

Ausenco Ltd received a notice of termination for its work at the mine because of Rio’s decision to postpone the expansion, the Brisbane-based company said today in a statement to the exchange.

The expansion was announced last July before the resources boom fizzled. First production from the expansion had been slated for the fourth quarter of 2010. Expanding the Corumba mine would have increased output capacity more than fivefold to 12.8 million tonnes a year. It was also planning to conduct a study to expand the mine further to 23.2 million tonnes.

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 USD 5 billion in spending to help reduce debt and conserve cash.

(Sourced from Bloomberg)