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Anglo-Australian miner Rio Tinto said Thursday that it has slashed the cost of its iron ore expansion plans at its Pilbara operation in western Australia by $3.0 billion (2.2 billion euros).
Rio said in a statement that it would spend "significantly" less than previously expected, but added that it would now take until 2017 to increase production capacity to 360 million tonnes per year. That was further away than the previous target of 2015.
However, Rio added that it hoped production to reach 330 million tonnes in 2015, which was quicker than some analysts had expected.
"Expanding our world-class, low-cost, high-margin Pilbara operations represents the most attractive investment opportunity in the sector and is in line with my commitment to be totally focussed on only allocating capital to opportunities that will generate the best returns to shareholders," said Rio chief executive Sam Walsh in the statement.
"The breakthrough pathway we have identified ... means we will deliver the expansion at an estimated capital cost of more than $3 billion below previous expectations."
According to Liberum Capital analysts, Rio has now cut the overall cost of the proposed expansion from about $5.0 billion to $2.0 billion.
"This investment is driven by the attractive long-term fundamentals for iron ore which are underpinned by urbanization and income growth in the developing world, particularly China," added Andrew Harding, Rio Tinto's head of iron ore.
"By delivering these additional tonnes we will capture a greater share of demand and... (it) represents the best use of capital for our shareholders."
Thursday's news sent Rio Tinto shares soaring to the top of the London stock market.
Rio's share price surged 3.89 percent to finish at 3,261 pence on the FTSE 100 index, which closed 0.08 percent higher at 6,654.47 points.