Hard coking coal production by Rio Tinto PLC (RIO) fell 6% in
the fourth quarter of 2010 to 2.3 million metric tons from 2.4
million tons the previous quarter as record rainfall in the Bowen
Basin in Australia's Queensland state hit output, the company said
Tuesday.
But its share of iron ore output rose 6% on the year to 50.1
million tons in the fourth quarter from 47.2 million tons in 2009,
the world's second-largest iron ore producer said in a full-year
production report.
Rio Tinto has been aiming to consolidate its position as a world
leader in steelmaking materials over the past year, as record
commodity prices have helped it retire debt which hobbled it in the
aftermath of the global financial crisis.
Iron ore, copper, gold, silver, platinum and tin all hit
long-term price records in 2010 as demand recovered from the
post-financial crisis slump.
The miner is planning a 50% increase in its production capacity
from Australia's iron-rich Pilbara region by 2013, and this year
also signed an agreement with Aluminum Corp. of China Ltd., or
Chinalco, to exploit the Simandou iron ore project in Guinea, which
is estimated to be capable of producing 70 million tons of iron ore
a year.
Before Christmas, the miner announced a A$3.9 billion offer for
Riversdale Mining Ltd., which aims to mine a 13 billion ton coal
resource in Mozambique for the hard coking coal used in blast
furnaces.
Chief Executive Tom Albanese said the company's performance
could be measured by its quarterly and annual production records
for iron ore in the fourth quarter and 2010 as a whole.
"Running our operations at full capacity was a priority for Rio
Tinto in 2010, in an environment of strong prices for most of our
commodities," he said.
Paul Young, a mining analyst at Deutsche Bank in Sydney, said
that the results ratified Rio's decision to focus on upgrading its
iron ore output. "The planets were well-aligned for Rio's iron ore
production in the fourth quarter," he said.
The miner plans to raise its annual output of Pilbara iron ore
to 283 million tons by the end of 2013 from 184.6 million tons in
2010, with a further expansion to 333 million tons in 2015
currently undergoing feasibility studies.
Expansions to its Pilbara iron ore joint ventures worth US$7.2
billion were approved during the year, with Rio Tinto's share of
the spending around US$5.3 billion.
However, adverse weather over the Australian wet season
threatens some of the major producing regions for the world's
number-three listed miner. Above-average cyclone activity is
expected in the Pilbara over the next few months and Rio Tinto's
Boyne aluminum smelter and four Bowen Basin mines have declared
force majeure in recent weeks because of rainfall and flooding in
Queensland.
The Bowen Basin produces nearly two-thirds of the world's hard
coking coal, an essential ingredient in steelmaking, and some
analysts predict prices of the commodity to double to as high as
US$500/ton as a result of the supply disruption from the
rainfall.
Rio Tinto, the first of the Bowen Basin's major miners to
announce its production for the last months of 2010, declared force
majeure on its local mines Dec. 29 and said Tuesday that while
"limited operations" were underway it was unable to provide an
estimate of the impact of the weather or the duration of the force
majeure declaration.
Hayden Bairstow, an analyst at CLSA in Sydney, said that output
was nonetheless much as expected.
"Iron ore production records will be pretty much par for the
course over the next few years and, to be honest, I could have seen
the coal numbers even lower given the weather they've been having
in Queensland," he said.
Rio Tinto said hard coking coal production for the full year
increased by 20% to 9.0 million tons from 7.5 million tons in 2009,
short of a predicted 9.5 million ton figure in the company's
October operations review.
Iron ore production of 184.6 million tons was well ahead of
guidance at 179 million tons, and rose 9% on year.
Rio Tinto is the world's second-biggest producer of aluminum and
iron ore, the biggest producer of uranium and a top-five producer
of coking coal and copper.
Fourth-quarter mined copper production fell 9% on year to
185,200 tons from 203,300 in spite of booming prices for the
commodity, with full-year production down 16% to 679,100 tons from
804,700 tons in 2009.
Rio Tinto has respective stakes in Chile's Escondida and
Indonesia's Grasberg copper mines, the world's two largest, of 30%
and 40% respectively. The company said ore grades had declined at
both mines over the course of the year, hitting output and pushing
Escondida's production down 11%.
Aluminum production was flat on the year at 962 million tons
against 957 million tons in the fourth quarter of 2009, and alumina
was also flat at 2.3 million tons in the fourth quarter. Alumina is
an intermediate commodity in the production of aluminum from
bauxite ore.
The company said that full year earnings before interest, tax,
depreciation and amortisation would be trimmed by US$117 million as
a result of electricity purchases caused by low rainfall in Quebec,
where Rio Tinto's aluminum smelters normally depend on low-cost
hydroelectric power, but underlying earnings would benefit by
US$180 million as a result of higher prices for the company's
provisional copper sales.
Uranium production from Rio Tinto's Ranger and Rossing mines,
the world's second- and third-largest, dropped 3% to 3.3 million
pounds from 3.4 million pounds in the fourth quarter of 2009 and
fell 20% in 2010 to 11.4 million pounds from 14.1 million pounds in
2009.
-By David Fickling, Dow Jones Newswires; +61 2 8272 4689;
david.fickling@dowjones.com
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