Fatality, maintenance weighs on Rio iron ore result

RIO Tinto posted a lower quarter of iron ore production and sales due to planned maintenance.
Fatality, maintenance weighs on Rio iron ore result Fatality, maintenance weighs on Rio iron ore result Fatality, maintenance weighs on Rio iron ore result Fatality, maintenance weighs on Rio iron ore result Fatality, maintenance weighs on Rio iron ore result

Cape Lambert. Courtesy Rio Tinto

September quarter Pilbara iron ore production (on a 100% basis) was down by 3% quarter-on-quarter and year-on-year to 82.5 million tonnes, while shipments dropped by 5% quarter-on-quarter and 7% year-on-year to 81.9Mt.

Rio attributed the result to planned maintenance cycles and safety pauses across all operations following a fatality at Paraburdoo in August.

The result was in line with UBS' forecast.

"Year-to-date Rio is tracking to deliver 334Mt however we see a strong December quarter will drive 2018 production of 338Mt (guidance is for 330-340Mt)," it said last week.

"Rio has indicated production at the upper end of guidance is expected with shipments more evenly distributed between each half than previous years."

Rio maintained full-year guidance.

Mined copper production of 159,700 tonnes was 32% higher year-on-year, mainly due to increased production from Rio Tinto Kennecott due to higher grades.

Rio said its expected share of mined copper production for 2018 was expected to be at the upper end of guidance of 510,000-610,000t.

Bauxite production was 12.7Mt, down 4% over the June quarter, with strong production at Weipa offset by lower production at the non-managed Sangaredi and Porto Trombetas mines.

The first bauxite production from the new Amrun mine in Queensland is now expected in the current quarter.

Aluminium production of 900.000t was up 3% quarter-on-quarter but down slightly over the same quarter of 2017 due to ongoing labour problems in Canada.

Full-year guidance has been revised down to 3.4-3.5Mt from 3.5-3.7Mt.

Rio CEO J-S Jacques said September was a consistent quarter, with copper the highlight.

"We made strong strategic progress with the full exit from coal, the announcement of the additional $3.2 billion of share buy-backs, and the signing of a binding conditional agreement to exit Grasberg for $3.5 billion," he said.

"We continue to pursue all opportunities to improve productivity and drive enhanced cash flow generation. This, combined with the disciplined allocation of capital, will ensure we continue to deliver superior returns to our shareholders in the short, medium and long-term."

An annual re-forecast of the Oyu Tolgoi underground development schedule and costs has confirmed capital costs of US$5.3 billion, in line with the previous estimate.

Construction of the first draw bell is still expected in mid-2020, but delays in completing Shaft 2 will likely result in first production being pushed back from the first quarter of 2021 to the third quarter of 2021.

Pre-tax and pre-divestment exploration and evaluation expenditure charged to the profit and loss account for the first nine months of the year was $341 million, up from $297 million last year.

The company is active in eight commodities across 16 countries.

Rio shares opened 0.7% higher at A$78.05.