Mixed production and sales news from two of Rio Tinto’s listed partly-owned subsidiaries yesterday ahead of the parent’s release of its third quarter report later today.
NSW coal miner Coal & Allied Industries yesterday downgraded its full year coal production and sales forecast due to wet weather.
And uranium miner, ERA Resources revealed higher sales in the third quarter than in the June three months, but at the same time the total for the September period was off 35% from the same quarter of 2009 and it also revealed a 25% cut in sales for the full year.
That left ERA shares down more than 6%, or 93c, at $13.53.
Coal and Allied shares eased 69c to $110.95, and then rose to finish up 13c at $111.77.
Coal & Allied said its share of total saleable coal production from its various joint ventures in the September quarter fell by 15% to 4.228 million tonnes (Mt), compared to the same period last year, due to extended periods of wet weather and changes in the type of coal seam being mined (more thermal than soft coking coal in some cases, or more difficult mining conditions).
Coal and Allied said it now expects to produce between 25 million and 26 Mt compared with a previously targeted 27 Mt for its joint ventures for calendar 2010.
"Coal & Allied’s share of total saleable production in the September quarter was 4,228kt, nine per cent lower than the prior quarter, and 15 per cent lower than the corresponding quarter in 2009.
"Production was impacted by extended periods of wet weather with approximately 13 per cent of calendar time lost to rain during the quarter, which is well above our planned and prior year average levels.
"Whilst we continue to expect a strong Q4, the continued impact of adverse weather has led to a reduction in full year production and sales expectations to 25-26Mt (100 per cent basis), though this remains contingent on strong coal chain performance and more favourable weather patterns," the company told the Exchange.
But there was good news, with sales up in the quarter. Coal & Allied said its share of coal sales for the third quarter was 4,856 million tonnes, up 8% on the June 2010 quarter and 3% above the same quarter of last year.
And in terms of profit, the company might do better than the raw figures suggest because it reminded the market yesterday that more than one million tonnes of coal priced until higher priced contracts struck several years ago, would be supplied this half.
"As previously highlighted, the Coal & Allied sales portfolio includes approximately 1.6mtpa of long term non-indexed export sales contracts that were entered into several years ago. It should be noted that in 2010 there is a strong bias in sales under these contracts towards the second half of the year. Some of those prices were substantially above current indexed (quarterly market prices)."
At ERA, the September quarterly report was another poor report from the group, confirming that 2010 has turned out to be miserable with production, market prices and sales down and grades lower than forecast and for much longer than expected.
For the second or third time in 2010, the company has been forced to trim its production guidance, saying ore grades in the September quarter were lower than expected.
ERA shares fell by more than 5% after the Northern Territory uranium producer said it would need to purchase additional supplies to meet its sales commitments.
ERA said that while mill head grade had improved compared with the June quarter, they were still significantly below 2009 levels.
This has forced the company, the world’s fourth largest uranium producer, to cut expected 2010 uranium oxide production to 3,900 tonnes, from 4,300 to 4,700 tonnes forecast in the previous quarter.
The company said it would need to purchase additional supply to meet its sales commitments in 2010, expected to be around 5,000 tonnes.
"This is expected to adversely impact ERA’s 2010 earnings, as the small price margin associated with the sale of the purchased material is more than offset by the ongoing costs of operation," the company said.
ERA has started the year expecting sales to be around 2009’s level at 5,240 tonnes, but weighted towards the second half of the year with lower grades in the first half offset by higher grades in the December half.
That hasn’t happened, and at 3,900 tonnes, sales in 2010 will be off 25% and on weaker prices for parts of the year, which will really hammer the ERA profit and loss account.
