Rio Tinto (RIO) has trimmed its forecast for iron ore exports for the year to December by 10 million tonnes (or more than $US500 million) because of bad weather in the first half and other factors.
The cut, to 340 million tonnes of Pilbara and Canadian ore, was revealed in the company’s June half year production and sales report released yesterday.
The lowered guidance came despite rises in both production (79.7 million tonnes) and shipments (81.4 million tonnes) of iron ore in the June quarter which topped market forecasts.
In fact Rio said its shipments rose a solid 8% in the quarter from a year ago and they were also up 12% from the previous quarter. For the six months to June shipments were also up 8% from a year ago at 153.9 million tonnes.
Production for the six months to June was up a strong 11% at 154.3 million tonnes. Rio had to dip into its stocks in the June quarter to meet its shipping schedule.
That improvement in production was despite the bad weather (two cyclones in the half year which cut production by seven million tonnes), Rio said said yesterday.
"The key elements of the infrastructure expansion are complete,” the company said yesterday.
"The focus is now to ramp up the new equipment to full capacity and generate maximum value from the integrated system.
"This includes improvements from debottlenecking and productivity enhancements supported by a range of low cost brownfield developments.
“Around 40 million tonnes a year of very low-cost brownfield expansions, principally at West Angelas, Nammuldi and Brockman mines, were completed in the half, with an average mine production capital intensity of around $9 per tonne,” the company added.
RIO 1Y – Bad weather lowers Rio’s iron ore production
The company also reported a 5% increase in bauxite production, to 10.7 million tonnes, but said quarterly copper output fell 19% to 134,000 tonnes. Rio left its guidance for copper, aluminium and bauxite unchanged for the full 2015 year.
The quarterly results came after Rio’s Oyu Tolgoi mine in Mongolia had its best quarter in its short history, with production of copper concentrates rising by more than 64% from the March quarter of this year.
The Oyu Tolgoi mine is Rio’s most important growth project, and the company’s involvement was boosted in May when it resolved long-standing differences with the Mongolian government.
Rio is closing in on finalising the raising of $US4 billion ($5.4 billion) or more to finance the underground expansion of the project. That financing should be arranged and signed before the end of 2015.
Rio shares last traded at $US53.31, up 0.3%.
RIO CEO Sam Walsh said in a statement with yesterday’s report that that Rio has “maintained our emphasis on efficiency and protecting returns, which is reflected in this solid production performance.
"We have also delivered three significant achievements within our growth portfolio. In aluminium, our Kitimat smelter is now producing metal from its expanded facilities, bringing 80 per cent of our smelting capacity into the first cost quartile.
"In copper, the Oyu Tolgoi underground project is moving forward following the signing of the Underground Mine Development and Financing Plan. In iron ore, we have completed the key elements of our Pilbara infrastructure expansion.
"Our combination of world-class assets, financial strength, and operating and commercial excellence provides a sound base to continue to generate sustainable returns for our shareholders,” Mr Walsh said.
