That $6bn TenderBook..., page-71

In summary, I concur with your post. The rest of this post is waffle to that effect.

RIO's lean-style CAPEX management simply means undertaking projects in an intelligent way. That is, do only what needs to be done when the need is there, and if possible, ensure that RIO gets some additional saleable product from step one to help fund step two, and so on. Also, by timing these steps judiciously, equipment used in one step of a subproject can be used in a following step, or even a different subproject, which should allow for a cheaper cost-to-deliver.

Silvergrass was in effect a subproject of a larger project called the "Nammuldi incremental tonnes" (NIT) project. By redesigning what needed to be done, and when, RIO ended up with a lower CAPEX at Silvergrass than was originally mooted. The Silvergrass was part of what was called, the "Nammuldi incremental tonnes" (NIT) project. If you read the article at https://www.copyright link/business...cut-of-rio-tintos-silvergrass-20160810-gqpfrb you will find words to the following effect:

At $US338 million, many observers were surprised by the low costs of completing Silvergrass, even allowing for the fact that it had effectively been broken into three projects via the NIT work.

Speaking last week, Rio's chief financial officer Chris Lynch said the lower-than-expected cost was due to design changes and the use of equipment from elsewhere in Rio's portfolio. Mr Lynch said, “If we were talking six to 12 months ago, we would have had probably just shy of $US500 million allocated to what was yesterday approved for $US338 million.”

Projects requiring CAPEX of hundreds of million dollars are probably better for NWH than projects requiring a few billion dollars. The smaller deals allow for more give and take by the parties, thus moving closer to mutual optimisation of the scope of work, and some aspects of timing. Also, large service suppliers are not going to bust their guts to win such deals.

In summary, although RIO's modus operandi relative to CAPEX may reduce the cost of projects, the resultant lean-style approach probably advantages NWH. In respect to the good relationship between RIO and NWH, I am tempted to use another Latinism, modus cooperandi, to describe the give-and take required to reach an optimum deal (“Pareto optimality” in the lingo of economists). Ancient Romans probably never used the phrase, modus cooperandi.