Rio Quarterly Production Falls Short
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Rio Tinto (RIO) has made a slow start to the year, with first-quarter shipments and production of iron ore and copper affected by bad weather in Western Australia, Chile and Indonesia.
Earlier this month Fortescue Metals Group (FMG) also blamed bad weather for a 6% fall in its iron ore shipments during the March quarter.
And we can expect to reveal a similar impact on its WA iron ore exports when it releases its March quarter (its third for the financial year) on April 26.
Rio told the ASX yesterday it had shipped 76.7 million tonnes of iron ore from its Pilbara operations in the three months to March 31, similar to a year earlier but slightly behind the rate required to achieve its full-year target. The quarter's production declined three per cent to 77.2 million tonnes.
"Production and sales were both impacted by significant weather disruptions, which resulted in heavy flooding across several sites including the rail network, along with the suspension of ship loading on a number of occasions," the company said in a statement on Thursday.
Despite the disruptions, the company maintained its full-year guidance for iron ore shipments of 330 million to 340 million tonnes.
Copper was more badly impacted by a combination of industrial action in Chile at the Escondida mine and government policy changes which hit the Grasberg mine in Indonesia.
Rio reported a 37% slump in mined copper production to 84,200 tonnes for the quarter, blaming the 43-day labour strike at Escondida for the decline.
The strike, along with the curtailment of production at the Grasberg mine in Indonesia, has forced the miner to lower its full-year production target to between 500,000 and 550,000 tonnes, down from the previous estimate of 525,000 to 665,000 tonnes.
The situation in Indonesia seems to have worsened in the wake of new mining regulations targeting exports of unrefined metals including copper concentrate which Rio warned “may have a significant impact on Rio Tinto’s share of production”.
“In the absence of an export permit, [the Rio Tinto joint venture with Freeport-McMoRan] has had to reduction production to around 40 per cent to match domestic smelting capacity," yesterday's statement said.
"This has results in near-term actions to reduce its workforce, significantly reduce costs and reduce and/or suspend captial expenditure on its underground development projects and new smelter."
Rio said the joint venture was working with the Indonesian government on a solution but there is also the prospect of legal action against the government, the statement said.
Coking coal production was also down, by 20 per cent, partly because of planned operational issues (the coal contribution will fall sharply after Rio competes the sale of its NSW mine interests to Chinese buyers).
The company has still maintained its full-year guidance for coal, aluminium, alumina and bauxite production. Rio shares eased 0.4% to $58.67.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.