Wednesday, April 16, 2014

Rio Tinto's iron ore production hit by weather

Rio Tinto's iron ore production has fallen short of some expectations, with the miner producing 66.4 million tonnes of iron ore from its global operations.

Deutsche Bank analyst Paul Young had predicted iron ore production of 70.5 million tonnes across Rio's global operations, with about 68 million tonnes of that expected to come from the Pilbara.

The Pilbara ended up producing just 63.4 million tonnes, with the reduced volumes blamed on cyclones and heavy rain in the Pilbara. That number includes ores sold by Rio that were owned by joint venture partners like Hancock Prospecting, and Rio's share was 50.6 million tonnes.

The benchmark iron ore price was fetching $US117 per tonne on Tuesday morning.

Rio produced 66.5 million tonnes from its Pilbara operations in the December quarter.

Rio produced 266 million tonnes in 2013 and is hoping to reach 295 million tonnes in 2014.

But Rio's copper division - its second most important commodity - performed better than expectations with production of 156,500 tonnes.

Mr Young had predicted 143,000 tonnes of production from the copper division.

The performance was weaker than the previous quarter due to lower grades at the Kennecott mine in Utah, and problems with equipment at Oyu Tolgoi in Mongolia.

Negotiations with the Mongolian Government over the development of the Oyu Tolgoi mine are still not complete, and as Fairfax Media reported last month, funding commitments from at least 15 commercial banks for the $US5 billion ($5.3 billion) expansion of Oyu Tolgoi expired on March 31.

The Rio subsidiary that is building Oyu Tolgoi - Turquoise Hill Resources - said on Tuesday that it had now asked for extensions of those funding commitments out to September 30.

Rio hopes it will not take that long to strike an agreement with Mongolia, with a agreement mid-year more likely.

Rio shares last traded at $63.26.

After problems with rake blades in the tailings thickeners during the March quarter, sales of copper concentrate from Oyu Tolgoi are now matching production rates.

Rio's annual meeting of shareholders in London will take place later tonight, with the Australian AGM set to be held in May.

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