Rio hit by the gods
Wild weather to curb output by 10 million tonnes
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.