Weather slows Rio iron ore pro­duc­tion

Townsville Bulletin - - NEWS -

BAD weather has achieved what ri­val min­ers and se­nior politi­cians have failed to do - rein in Rio Tinto’s iron ore pro­duc­tion.

The min­ing gi­ant has low­ered its full year iron ore guid­ance to 340 mil­lion tonnes, from around 350 mil­lion tonnes af­ter un­sea­sonal weather events, in­clud­ing two cy­clones, hurt its Pil­bara oper­a­tions.

Rio es­ti­mates the bad weather low­ered its June quar­ter pro­duc­tion by about seven mil­lion tonnes, which helped lead a mini- re­vival in de­pressed iron ore prices.

But any respite for strug­gling ju­nior min­ers has been short lived, with Rio’s oper­a­tions ap­par­ently now back on track and con­cerns about China weigh­ing on the price of the com­mod­ity. Iron ore prices hit a 10- year low of $ 44.10 last week amid a melt­down in the Chi­nese share mar­ket, but the ma­te­rial has since lifted back above $ US50.

Rio is stick­ing with plans to lift its an­nual pro­duc­tion to 360 mil­lion tonnes a year and BT In­vest­ment Man­age­ment an­a­lyst Bren­ton Saun­ders ex­pects the min­ing gi­ant to be pro­duc­ing at that run rate by the end of 2015.

Mr Saun­ders said the re­duc­tion in Rio’s tar­get for this year was no sur­prise, given its well known pro­duc­tion is­sues dur­ing the first half.

“Rio is in the mid­dle of a very ag­gres­sive ramp up in pro­duc­tion and this is re­ally the first hitch they’ve had along the way,” he said.

“Dis­rup­tions are to be ex­pected with all big ramp- ups in any sort of min­ing.” Ri­vals like Fortes­cue founder An­drew “Twiggy” For­rest have hit out at Rio and BHP Bil­li­ton’s moves to in­crease pro­duc­tion in the face of wan­ing de­mand from China.

Mean­while, West Aus­tralian Premier Colin Bar­nett has la­belled the com­pany’s ex­pan­sions plans “dumb”, while Prime Min­is­ter Tony Ab­bott ini­tially ap­peared to back a par­lia­men­tary in­quiry into the min­ing giants ac­tions, be­fore de­cid­ing against the move.

Many have laid the blame for the col­lapse in the ore price, which has more than halved in the past year, squarely at the feet of Rio, BHP and Brazil­ian gi­ant Vale.

But Mr Saun­ders says that as the low­est cost pro­ducer in the Pil­bara, it was not in Rio’s in­ter­est to pull back pro­duc­tion. “Un­less you have some kind of meet­ing of the minds of some of all the big play­ers, it is dif­fi­cult for some­one at the bot­tom of the cost curve to con­cede they need to be cut­ting pro­duc­tion,” he said.

“De­spite be­ing fi­nan­cially worse off, Rio’s iron ore busi­ness is not un­der stress, the as­sets still pro­duce rea­son­able re­turns on cap­i­tal.”

Rio Tinto shares gained 19c to $ 53.31.

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