Rio Tinto reported record first half production figures for iron ore, copper and alumina yesterday, handy news as it continues to fight the unwanted approach from BHP Billiton.
Rio said in its second quarter and first half production report that second- quarter iron ore output rose 13% to a record because of rising demand from China.
The company also won a 85%-plus price hike for iron ore, which applies from the second quarter, so that should provide a substantial boost to first half earnings when they are reported next month.,
Rio said second quarter iron ore output rose to 41.9 million tonnes in the June quarter, from 37.1 million tons in the same quarter of 2007 (Rio uses a calendar financial year).
Second quarter iron ore output rose 12% from the March quarter and together 14% more iron ore was produced in the first half of 2008 at 79.23 million tonnes, compared to the 69.36 million tonnes in the first half of 2007.
Alumina and mined copper output also reached a record. But refined copper production in the first half of this year fell 20% to 161,000 tonnes for Rio, compared to 202,000 tonnes in the same period of last year.
Coking and thermal coal output in Queensland rose in the June quarter as Rio’s Queensland operations recovered from heavy rain and floods, while there was some improvement elsewhere in thermal coal sales.
Sales from Coal and Allied in NSW were steady in the latest half year compared to 2007 as port congestion problems continued.
Rio shares rose 48 cents to $122.48 after the result was posted, turning round an earlier decline before the announcement. The shares then faded to close lower at $121.44, off 56 cents as investors look another look at the figures and concluded that there was a growing chance the offer from BHP might not succeed.
BHP shares fell 7 cents to $39.29 and the BHP offer of 3.4 of its shares for every Rio share was worth around $133.51. That’s a premium of around 10%: the market still reckons the offer has got little chance of succeeding.
Coking coal output rose 25% to two million tonnes in the quarter, while alumina output rose more than threefold and production of aluminum gained almost fivefold after Rio’s purchase last year of Alcan of Canada.
Mined copper was mixed, with a 27% drop at Bingham Canyon in the United States, a 22% increase at the Escondida mine in Chile (where BHP is a major shareholder )and a 27% rise at the Grasberg joint venture in the Indonesian province of Papua (with Freeport McMorran being the dominant shareholder).
Diamond output from the Argyle mine in WA dropped by 32% to 2.992 million carats after production was affected by a variability in feed grades as the mine transitions from open-pit operations to underground.
Uranium production was mixed, with a 26% drop at the Ranger mine in the Northern Territory and a 55% increase at the Rossing mine in Namibia.
Rio’s subsidiary, ERA reported the fall Tuesday and blamed excess water in the open pit that restricted access to the higher-grade ore.
Higher grades at Rossing led to an increase in production.
Commenting on the second quarter’s production results, chief executive Tom Albanese said in a statement accompanying the production reports
"These strong results show that we are continuing to expand to meet rapid demand growth in the developing world. We have set quarterly production records for iron ore, mined copper and alumina, thanks to increasing investment in growth projects and a management commitment to deliver more tonnes faster, while maintaining our focus on safety and costs.
“The integration of Alcan is proceeding to plan and the business continues to perform well. I am particularly pleased to see how swiftly our Australian coal operations recovered from the first quarter floods.
“Chinese GDP is continuing to grow at around ten per cent per annum, demand is strong while supply remains constrained. Fundamentals, not financial speculation, are driving the record prices we are realising across aluminium, copper, iron ore and coal and we see the same trends continuing into the future.”
• Record quarterly global production of iron ore, up 13 per cent on the second quarter of 2007, recovering some of the shortfall from the cyclones in the first quarter.
• Record quarterly iron ore production of 48 million tonnes in Australia, up 14 per cent (on a 100 per cent basis) compared with the second quarter of 2007, as the iron ore operations continue to expand their capacity.
• Weighted average iron ore price increase of 85.7 per cent negotiated with Asian customers for 2008 contract shipments from the Pilbara.
• Record quarterly mined copper production (for existing operations), up 15 per cent on the corresponding quarter of 2007.
• Rio Tinto Alcan continues to perform well with bauxite production up 100 per cent, alumina up by 231 per cent and aluminium up by 374 per cent, compared with the second quarter of 2007, reflecting the acquisition of Alcan in the fourth quarter of 2007. On a proforma basis the respective increases for bauxite, alumina and aluminium were 11 per cent, nine per cent and one per cent. • The Sohar aluminium smelter in Oman began operating in June, on time and on budget, with first hot metal produced during the same month.
• Australian thermal and coking coal production were up by 15 per cent and 25 per cent on the second quarter of 2007, recovering well from the heavy rainfall experienced in the first quarter. Strong performance from the minerals businesses with borates production up 18 per cent and
