Rio Tinto reports 'solid' production performance in second quarter

Rio Tinto issued its second quarter production results on Tuesday, reporting Pilbara iron ore shipments of 88.5 million tonnes on a 100% basis, which was 14% higher year-on-year, benefiting from better weather and apparently reflecting improved productivity across the system.

The FTSE 100 firm said shipments in 2018 were expected to be at the upper end of the existing guidance range of 330 to 340 million tonnes.

Bauxite production of 13.3 million tonnes was 3% higher than the corresponding quarter of 2017, which Rio Tinto put down to continued operational improvements.

Third party shipments increased by 10% to 8.7 million tonnes, due to “firm demand”.

Aluminium production of 0.9 million tonnes was 3% lower than the second quarter of 2017, due primarily to labour disruptions at the non-managed Becancour smelter in Canada and a power interruption at the Dunkerque smelter in France.

Mined copper production of 156,800 tonnes was 26% higher than the same quarter last year, which reflected strong production at Escondida following a labour union strike in the first half of last year.

Hard coking coal production was up 40% than 2017, due mainly to the impact of Cyclone Debbie last year.

Titanium dioxide slag production fell 27% from the second quarter of 2017.

The company noted that production was suspended at Rio Tinto Fer et Titane in Sorel-Tracy following a fatality on 26 April.

Production at Richards Bay Minerals had been impacted by ongoing labour disputes between contractors and their employees.

The company said production at the Iron Ore Company of Canada was “significantly impacted” in the second quarter, where operations were suspended while a new labour agreement was reached.

Operations returned to normal production rates by the end of June.

Cost inflation was being experienced, Rio Tinto claimed, particularly in the aluminium group with higher raw material costs.

Disruptions during the first half also impacted unit costs at IOC and RBM.

The board said its “major growth projects” remained on track, with the first bauxite shipment from Amrun expected in the first half of 2019 and construction of the first drawbell at Oyu Tolgoi Underground anticipated in mid-2020.

The ‘AutoHaul’ project achieved two major milestones, with regulatory approval on 18 May and the first loaded autonomous train journey from mine to port completed on 10 July.

Divestments announced in the first half of 2018 totalling $5bn pre-tax, subject to completion conditions, were all expected to complete by the end of 2018, including the Dunkerque and ISAL smelter sales and the group's coking coal assets, Rio Tinto reported.

On 12 July, Rio Tinto announced that it had signed a non-binding heads of agreement with PT Indonesia Asahan Aluminium and Freeport-McMoRan, detailing the proposed principal terms for the sale of its entire interest in Grasberg to Inalum for $3.5bn.

Given the terms that remained to be agreed, there was no certainty the transaction would complete and any final agreements would remain subject to regulatory approvals, the Rio Tinto board cautioned.

“Operational performance was solid across most commodities, rounding out a strong first half performance for the group,” said Rio Tinto chief executive J-S Jacques.

“Our increasingly flexible Pilbara iron ore system continued to perform well.”

Jacques said the firm’s bauxite and copper businesses also delivered strong operating results, demonstrating the success of Rio’s ongoing mine-to-market productivity programme, which was “increasingly important” in an environment of rising cost inflation.

“Our sustained focus on cash generation, combined with disciplined capital allocation, will ensure we continue to deliver superior returns to our shareholders across the short, medium and long term.”