The slowing Chinese economy hasn’t deterred Rio Tinto (RIO) from continuing to drive its WA iron ore expansion.
The mining giant said in yesterday’s second quarter and first half report that the expansion will "deliver its first tonnes" by the end of this quarter.
"Expansion of Pilbara capacity to 290 million tonnes per year remains on budget and on time to deliver first tonnes by the end of the third quarter of this year.
"Delivery of first tonnes will be followed by a steady commissioning and ramp-up period. Completion of the Rail Capacity Expansion infrastructure project was the most recent milestone reached in the quarter," the company said yesterday.
The company said that it had record first half iron ore production, shipments and rail volumes in the Pilbara, "despite a conveyor belt breakage resulting in one of five ship loaders being side-lined for almost three weeks and unseasonal wet weather which led to flooding in the Pilbara".
The company said it boosted iron ore production by 6% to a record 127.2 million tonnes during the first half of the year and shipped a record 118.6 million tonnes of ore, up 4%.
"First half 2013 sales of 111 million tonnes set a new record for a first half and were two per cent higher than the same period in 2012.
"Second quarter sales were lower than production due to interruptions in shipping caused by the conveyor belt breakage and significant flooding in the Pilbara.
"Approximately 30 per cent of sales in the first half of 2013 were priced with reference to the prior quarter’s average index lagged by one month.
"The remainder was sold either on the current quarter average, current month average or on the spot market. Prices are adjusted for product characteristics and iron and moisture content," Rio said.
The conveyor belt problem happened in the May when shipments totalled 63.1 million tonnes, 1% up on a year ago.
"Our iron ore operations continue their impressive performance, with period on period productivity improvements," CEO, Sam Walsh, said according to the statement yesterday. "One of our key priorities this year is to deliver our growth projects."
Copper production for the half jumped 17% to more than 296,000 tonnes, thanks to higher grades at the huge Escondida mine in Chile (BHP controls it). The owners have spent billions in recent years preparing for a major effort to boost grades from new areas at the mine.
Rio said that copper grades also rose at its Utah mines in the US, but that was offset by the shutdown of the Bingham Canyon mine after a wall slide.
Despite this, Rio raised its copper production forecast for the year because of the new production from Mongolia and the higher grades from other mines.
"Rio Tinto’s share of mined and refined copper production is expected to be approximately 565,000 tonnes and 230,000 tonnes, respectively," the company said yesterday.
Rio said this includes a 25,000 tonne increase in the estimate from its Bingham Canyon mine, which is higher than first estimated after the huge 150 million tonne slide.
That slide will see Rio make a non-cash charge, to be excluded from underlying earnings, "primarily related to equipment damage and the write-offs of historical waste stripping balances, will be recognised in the 2013 interim results."
But investors will closely study comments about the next stage in the company’s iron ore expansion – the so-called project 360. (target 360 million tonnes of ore, from 290 million in the current plan, requiring an extra $US5 billion in spending).
There are suggestions that instead of building new mines, as originally thought, Rio could expand existing mine capacity and associated facilities, which would be a cheaper option.
The $US6.2 billion Oyu Tolgoi copper project in Mongolia made its first shipment of copper concentrate last week.
Titanium dioxide feedstock volumes were 25% higher than the second quarter of 2012 reflecting the doubling of the Group’s interest in Richards Bay Minerals.
And Rio said it is well on track to meet its $US750 million targeted reduction in exploration and evaluation spend in 2013, with spending in first half down by $US483 million over the same period of 2012.
Rio shares rose 56c to $55.33 yesterday.
RIO YTD – Iron ore plans still on track, despite cost worries
The company is due to report its first half profit on August 8.
BHP Billiton is due to release its fourth quarter and full year production figures later today.
