Herald Sun

Rio hit by the gods

Wild weather to curb out­put by 10 mil­lion tonnes

- JOHN DAGGE john.dagge@news.com.au

WILD weather has suc­ceeded where min­ing bil­lion­aire An­drew For­rest could not — forc­ing Rio Tinto to curb its iron ore out­put.

Aus­tralia’s big­gest iron ore miner yesterday cut its ship­ment forecast for the key steel­mak­ing in­gre­di­ent by 10 mil­lion tonnes to 340 mil­lion tonnes for 2015.

The re­duc­tion is worth about $680 mil­lion at yesterday’s spot price and will put pres­sure on the bot­tom line given iron ore ac­counts for about 85 per cent of its profit.

While the cut of­fers smaller ri­vals a sliver of re­lief, Rio was quick to point out it has now com­pleted all key in­fra­struc­ture work needed to lift the ca­pac­ity of its Pil­bara mines to a record 360 mil­lion tonnes a year.

“The fo­cus is now to ramp up the new equip­ment to full ca­pac­ity and gen­er­ate maxi- mum value from the in­te­grated sys­tem,” Rio said in an oper­a­tions up­date.

Rio and BHP Bil­li­ton have come un­der fire from Fortes­cue founder An­drew For­rest, who ac­cuses the duo of flood­ing the mar­ket with sup­ply in or­der to win mar­ket share.

The ma­jors have re­jected calls to cur­tail pro­duc­tion but “un­char­ac­ter­is­ti­cally se­vere weather” in the Pil­bara, in­clud- ing trop­i­cal cy­clones Ol­wyn and Quang, re­duced Rio’s iron ore ship­ments by 7 mil­lion tonnes in the six months the June.

Rio still man­aged to dig up 79.7 mil­lion tonnes in the three months to June, up 7 per cent on the pre­vi­ous quar­ter and 9 per cent on the same pe­riod a year ear­lier but slightly be­low what an­a­lysts were ex­pect­ing.

The miner shipped 81.4 mil­lion tonnes dur­ing the quar­ter, up 12 per cent on the pre­vi­ous quar­ter and 8 per cent on the same pe­riod last year.

Rio has pro­duced 154.3 mil­lion tonnes for the year to date.

Even with yesterday’s guid­ance cut, Rio re­mains on track to lift full-year pro­duc­tion by about 15 per cent on the 294.4 mil­lion tonnes it mined last year. UBS re­sources an­a­lyst Glyn Law­cock said Rio had ex­pe­ri­enced a “mixed quar­ter” with both iron ore and cop­per pro­duc­tion com­ing in be­low ex­pec­ta­tions.

Baux­ite and alu­mina pro­duc­tion rose 2 per cent over the quar­ter to 10.7 mil­lion and 1.9 mil­lion tonnes re­spec­tively. Alu­minium pro­duc­tion came in at 818,000 tonnes, up 1 per cent over the quar­ter.

Rio’s cop­per oper­a­tions con­tinue to be af­fected by work at the Bing­ham Canyon mine that suf­fered a ma­jor land­slide in 2013. Rio shares rose 0.4 per cent to $53.31.

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