2021 is going to be a year of marking time for Rio Tinto so far as output and sales are concerned with targets for the coming year little changed from 2020.
That means Rio will be looking to cost cutting and whatever price gains happen (after the huge gains for iron ore and copper in 2020) in the coming year to drive earnings growth.
For the company’s biggest earner, iron ore, there’s a growing suspicion that it will be hard-pressed to maintain the gains it saw in 2020 – a price surge of 80% is clearly out of the question and the 8.5% rise so far in January might also be a big ask to contain given that price rises have slowed in the past week.
Rio Tinto revealed in its final production and sales report for 2020 (for the December quarter) that it lifted iron ore sales 1% last year to 330.6 million tonnes – the middle of its guidance range of 324 to 334 million tonnes after a 2% rise in production to just over 333 million tonnes.
Fourth-quarter production of 86.0 million tonnes – of which Rio’s share was 71.0 million tonnes – was 3% higher than the same period of 2019.
The company said it was a “solid operational performance, considering weather disruptions and strict measures implemented in the second quarter to manage COVID-19.”
The company revealed also on Tuesday that it was aiming to ship between 325 million tonnes and 340 million tonnes of iron ore this year, a target not much changed from the final 2020 target of 324 million to 334 million tonnes.
Rio’s average price in 2020 was $US91 a dry tonne of iron ore (up 15.1%, or $12 a tonne from 2019) or $US98.9 a tonne per wet tonne – also up 15.1% or $US13 a tonne.
With barely any increase forecast for this year for shipments, and analysts not confident of further big sustainable gains in the iron ore price, Rio will find it tough to lift earnings in 2021.
This pressure will be offset though by a forecast surge in copper production – from 155,000 tonnes of refined metal in 2020 to a range of 210,000 to 250,000.
The increase could be as much as 50% and copper prices are forecast to remain solid this year with supply/demand in rough balance, COVID still impacting output in Chile and Peru and rising demand from renewables such as EVs.
2021 targets for bauxite, alumina and aluminium metal are all around 2020 levels.
However, Rio cautioned investors that the iron ore target remained subject to weather, market conditions and the fallout from the miner’s destruction of ancient caves in Western Australia’s Pilbara region last year.
“The future impact on our Pilbara iron ore operations, mine developments and heritage approach from the reform of the Aboriginal Heritage Act 1972 remains unknown,” Rio said.
“We will maintain a high level of engagement with traditional owners regarding current and proposed plans for mining activities.”
Rio said bauxite production for the year was 56.1 million tonnes, 2% higher than 2019 supported by the ramp-up of the expansion at the CBG mine in Guinea, and steady performance at the Pacific mines.
Aluminium production of 3.2 million tonnes was in line with 2019, with lower volumes from the curtailment of Line 4 at the Tiwai Point aluminium smelter in New Zealand and from the Kitimat smelter pot relining campaign, offset by the ramp-up of the Becancour smelter in Quebec.
Mined copper was above the guidance range, but 9% lower than 2019 due to lower grades at Kennecott as a result of planned pit sequencing and Oyu Tolgoi production phasing.
“The commercial and operational teams at Kennecott Utah achieved approximately 60,000 dry metric tonnes of copper concentrate sales in the fourth quarter to partly mitigate the impact of the delayed re-start of the smelter, which became fully operational during October,” Rio said.
In a separate announcement, the company said it has pushed back the production timeframe at its emerging Winu copper-gold project in Western Australia’s Eastern Pilbara by a year despite more drilling progress made in 2020.
Rio had previously expected to deliver first ore in 2023, now anticipates this milestone to be achieved in 2024.
Rio Tinto said in its December production and sales report that it was engaging with the Traditional Owners about the project, with heritage surveys, monitoring and agreement making continuing into this year.
Rio Tinto last year estimated Winu had 4.4 million ounces of gold and 1.8 million tonnes of copper and it has also reported high-grade gold grades at the nearby Ngapakarra prospect.
Wino is near the Havieron project of Newcrest/Greatland which is moving closer to start up with Newcrest revealing plans to invest $146 million announced for the construction of the box cut, exploration decline and associated surface infrastructure at the Havieron Project in Western Australia, which it owns in joint venture with Greatland Gold.
Rio said on Tuesday it had done 90 kilometres at Winu in 2020, which means the company must be about ready for a more extensive update than the one issued in July of last year.
“We further expanded our ground holdings in the Paterson region with a farm-in joint venture signed with Sipa Resources Limited adjoining Winu and the Citadel joint venture tenements,” Rio added.
Rio shares ended the day up 0.7% at $119.65.
