Rio Tinto is probably looking at higher earnings after revealing that iron ore production rose to record levels to meet strong demand from steelmakers, especially in China.
As well, higher production of refined copper and gold from the Grasberg Mine in West Papua puts the world's third biggest miner in a good position to report record earnings next month.
Iron ore production rose 11 percent to 37.1 million metric tons in the three months to June 30, refined copper rose 20 per cent, aluminium rose 5 per cent and there was a 36 per cent rise in the Grasberg gold output.
The news will buttress the Rio outlook after it agreed last week to buy Alcan for $US38.1 billion.
Shares of Rio fell 50 cents to $97.00 on the ASX yesterday after a small rise during the day. Other resources stocks including BHP Billiton were down on the day after metal prices were easier overnight.
Iron ore is booming, supplies are tight and there could be a price rise of up to 25 per cent for the 2008 year because of the continuing high levels of demand from China.
Rio's iron ore production recovered in the second quarter from the dip in the three months to March caused by bad weather and shipping delays.
Rio had already outlined the spending of $5 billion between 2003 and 2008 to expand iron ore mines, railroads and ports in Western Australia state and it's also looking at a further expansion in capacity, from 220 million tonnes a year by 2009, to 320-million tonnes capacity.
Rio owns 30 per cent of the huge copper Escondida mine in Chile (BHP Billiton is the major shareholder) which is the world's largest. Rio also has 40 per cent of the Grasberg mine in Indonesia, which is operated by Freeport-McMoRan Copper & Gold. Higher gold grades atGrasberg mine in Indonesia saw gold production rise 36 per cent to 327,000 ounces.
Rio's output of refined copper rose 20 per cent to 100,700 tonnes for the June quarter due to higher production from its Escondida plant.However mined copper output fell 10 per cent to 186,400 metric tonnes due to lower grades at its Kennecott operation in the US.
But in Australia, Rio's energy interests were mixed, as the coal industry continues to suffer from shipping delays.
"A recovery in market conditions led to a six per cent increase in hard coking coal production compared with the corresponding quarter of 2006, despite infrastructure challenges in Queensland," Rio Tinto said.
"Hard coking coal production added six per cent to 1.633 million tonnes, while thermal and semi-soft coal sank 27 per cent to 5.898 million tonnes after heavy rainfall in June.
"This compounded the infrastructure challenges of congested port and railway infrastructure experienced throughout the quarter," Rio Tinto said.
Last week Rio Tinto announced plans to pay $US38 billion ($A43.9 billion) to take over Canadian aluminium producer Alcan, making it the world's biggest producer or aluminium and fourth biggest producer of alumina.
The company said in a statement that itsshare of iron ore production was a record for the quarter, increasing by 11 per cent compared with the second quarter of 2006, and by 15 per cent compared with the previous quarter.
• Mined copper production fell by ten per cent compared with the same quarter of 2006 in line with lower grades at Kennecott Utah Copper.
• Refined copper production increased by 20 per cent compared with the second quarter of 2006 due to higher production at the Escondida leach plant.
• Higher gold grades at Grasberg contributed to a 36 per cent increase in Rio Tinto's share of mined gold production compared with the second quarter of 2006.
• Approval was given in July for the $1.8 billion expansion of the Yarwun Alumina Refinery. The expansion will more than double annual production, increasing output by two million tonnes to 3.4 million tonnes by 2011.
• Production of thermal and semi-soft Australian coal decreased by 27 per cent compared with the second quarter of 2006 following heavy rainfall in June. This compounded the infrastructure challenges of congested port and railway infrastructure experienced throughout the quarter.
The 76 per cent-owned associate, Coal and Allied reported yesterday that the New South Wales operations were impacted by heavy rains in June which resulted in the declaration of force majeure by Rio Tinto subsidiary Coal & Allied.
Reduced port throughput from infrastructure limitations led to continued delays in shipping and a resultant decrease in production as the effects were felt along the Hunter Valley coal chain.
Coal & Allied's share of production in the second quarter was 13 per cent lower than the first quarter due to Hunter Valley coal chain constraints and extreme weather conditions.
During the quarter Coal & Allied declared force majeure on a number of its sales contracts effective from 8 June 2007, as a result of severe floods in Hunter Region in New South Wales.
As a result, Coal & Allied's share of sales in the second quarter was 14 per cent lower than the first quarter.
Sales and production for the second half of 2007 will be aligned with allocated port capacity and are anticipated to be at similar levels to the first half of the year
• Uranium production increased by 46 per cent compared with the second quarter of 2006, with the Ranger operation (of ERA) able to process higher grade ore mined prior to the heavy rainfalls experienced in the first quarter of 2007. This more than offset a reduction in Rössing production from lower grades.
• Diamond production at Diavik set a new quarterly record.
