Rio Tinto Expects Utah Landslide to Hit Copper Output
Rio Tinto PLC (RIO.AU) Tuesday forecast a sharp fall in copper output
after a landslide at a big U.S. mine, intensifying pressure on the
mining company as it seeks to rein in costs amid a weak outlook for
commodity prices.
However, the London-based company said its two biggest investments--an expansion of its iron ore mines in Australia's Pilbara region and development of a vast copper deposit in Mongolia--remain on track as it seeks to rebuild confidence with investors after a series of writedowns on ill-timed acquisitions.
Rio Tinto said the collapse of a large section of the pit wall at the Bingham Canyon mine in Utah last week will mean its production of refined copper could fall by about 27% this year, making the company even more reliant on iron ore prices to drive its earnings.
Ground near a section of the pit had been unstable for months and finally slumped into the mine last Wednesday, carrying with it more than 150 million metric tons of material and damaging 14 haulage trucks and other equipment. Rio Tinto had moved buildings and equipment in anticipation of a slide, but Chief Executive Sam Walsh said the effect on production would still be significant.
The company said it is evaluating options to use stockpiles of material and resume mining ore from lower sections of the pit, which is one of the biggest copper mines in the U.S. An early assessment suggests the mine's refined copper output will be cut by about 100,000 tons this year, which will reduce output from all mines the company owns or has stakes in to about 205,000 tons.
Rio Tinto's share of copper production had risen 6% on the year to 80,500 tons in the three months through March, boosted by higher output from the Escondida mine in Chile, which is operated by BHP Billiton Ltd. (BHP).
"A pit-wall failure of that magnitude is significant," said Tim Schroeders, a fund manager at Pengana Capital, which owns shares in Rio Tinto.
Mining companies no longer have a tailwind from strong commodity prices, which have fallen on concerns over demand, and investors are increasingly concerned by any signs of uncertainty, he said.
Rio Tinto is looking to increase profits through expanding its iron ore operations in the remote Pilbara region of Western Australia state and on the Oyu Tolgoi copper and gold project in Mongolia. Oyu Tolgoi is due to begin commercial output in June but has been caught in a dispute over costs and funding with Mongolia's government.
"Both of these industry-leading projects remain on track for first production this year and are poised to deliver returns for our shareholders in the years ahead," said Mr. Walsh, who has pledged to cut costs and improve value for shareholders since taking over as chief executive in January.
To achieve production on time, Mr. Walsh said Rio Tinto needs to resolve issues with Mongolia's government over the 2009 investment agreement, which laid the foundations for the mine's development. Rio Tinto owns a 66% stake in the project through its control of Turquoise Hill Resources Ltd. (TRQ.T), while the government owns the remainder.
Still, Mr. Walsh said savings from job cuts and productivity improvements across the company are gathering pace and management was making progress in achieving a target of cutting costs by more than US$5 billion by the end of next year.
Production from Rio Tinto's iron ore mines totaled 61.2 million tons in the three months to Mar. 31, up 4% compared with a year earlier. However, volumes were down 8% on the prior quarter due to three cyclones that struck Australia's remote Pilbara region and temporarily halted shipping.
The company said it is on course to expand output in the Pilbara to 290 million tons a year by the third quarter of this year, and then increase it to 360 million a year by the first half of 2015. Output for this year is expected to be 265 million tons, which includes from mines it operates in Canada.
"Our operations achieved a solid performance in the first quarter, recovering rapidly from the seasonal weather disruptions," Mr. Walsh said.
The London-based company's iron ore operations accounted for almost half of sales revenue last year and more than 80% of earnings. However, more than US$14 billion in impairment charges against the value of aluminum and Mozambique coal assets pushed Rio Tinto to a loss of US$2.99 billion for 2012 and prompted Tom Albanese to resign as chief executive in January.
Write to Robb M. Stewart at robb.stewart@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
Copyright © 2013 Dow Jones Newswires
Read more: http://www.foxbusiness.com/news/2013/04/16/rio-tinto-expects-utah-landslide-to-hit-copper-output/#ixzz2Qh09oBOE
Rio Tinto said the collapse of a large section of the pit wall at the Bingham Canyon mine in Utah last week will mean its production of refined copper could fall by about 27% this year, making the company even more reliant on iron ore prices to drive its earnings.
Ground near a section of the pit had been unstable for months and finally slumped into the mine last Wednesday, carrying with it more than 150 million metric tons of material and damaging 14 haulage trucks and other equipment. Rio Tinto had moved buildings and equipment in anticipation of a slide, but Chief Executive Sam Walsh said the effect on production would still be significant.
The company said it is evaluating options to use stockpiles of material and resume mining ore from lower sections of the pit, which is one of the biggest copper mines in the U.S. An early assessment suggests the mine's refined copper output will be cut by about 100,000 tons this year, which will reduce output from all mines the company owns or has stakes in to about 205,000 tons.
Rio Tinto's share of copper production had risen 6% on the year to 80,500 tons in the three months through March, boosted by higher output from the Escondida mine in Chile, which is operated by BHP Billiton Ltd. (BHP).
"A pit-wall failure of that magnitude is significant," said Tim Schroeders, a fund manager at Pengana Capital, which owns shares in Rio Tinto.
Mining companies no longer have a tailwind from strong commodity prices, which have fallen on concerns over demand, and investors are increasingly concerned by any signs of uncertainty, he said.
Rio Tinto is looking to increase profits through expanding its iron ore operations in the remote Pilbara region of Western Australia state and on the Oyu Tolgoi copper and gold project in Mongolia. Oyu Tolgoi is due to begin commercial output in June but has been caught in a dispute over costs and funding with Mongolia's government.
"Both of these industry-leading projects remain on track for first production this year and are poised to deliver returns for our shareholders in the years ahead," said Mr. Walsh, who has pledged to cut costs and improve value for shareholders since taking over as chief executive in January.
To achieve production on time, Mr. Walsh said Rio Tinto needs to resolve issues with Mongolia's government over the 2009 investment agreement, which laid the foundations for the mine's development. Rio Tinto owns a 66% stake in the project through its control of Turquoise Hill Resources Ltd. (TRQ.T), while the government owns the remainder.
Still, Mr. Walsh said savings from job cuts and productivity improvements across the company are gathering pace and management was making progress in achieving a target of cutting costs by more than US$5 billion by the end of next year.
Production from Rio Tinto's iron ore mines totaled 61.2 million tons in the three months to Mar. 31, up 4% compared with a year earlier. However, volumes were down 8% on the prior quarter due to three cyclones that struck Australia's remote Pilbara region and temporarily halted shipping.
The company said it is on course to expand output in the Pilbara to 290 million tons a year by the third quarter of this year, and then increase it to 360 million a year by the first half of 2015. Output for this year is expected to be 265 million tons, which includes from mines it operates in Canada.
"Our operations achieved a solid performance in the first quarter, recovering rapidly from the seasonal weather disruptions," Mr. Walsh said.
The London-based company's iron ore operations accounted for almost half of sales revenue last year and more than 80% of earnings. However, more than US$14 billion in impairment charges against the value of aluminum and Mozambique coal assets pushed Rio Tinto to a loss of US$2.99 billion for 2012 and prompted Tom Albanese to resign as chief executive in January.
Write to Robb M. Stewart at robb.stewart@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
Copyright © 2013 Dow Jones Newswires
Read more: http://www.foxbusiness.com/news/2013/04/16/rio-tinto-expects-utah-landslide-to-hit-copper-output/#ixzz2Qh09oBOE
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