19th Apr 2016 11:33
LONDON (Alliance News) - Rio Tinto PLC Tuesday said the delay in its AutoHaul project at its flagship Pilbara mine in Australia will negatively impact its iron ore production next year as the multi-commodity miner reported a mixed set of production results for the first quarter of 2016.
Rio Tinto, which generates around two-thirds of its earnings from iron ore, said iron ore production will be around 10.0 to 20.0 million tonnes lower in 2017 than expected due to the delay at the AutoHaul project, but said its guidance for this year remains unchanged.
The company said it still expects to ship around 350.0 million tonnes of iron ore from its operations in Australia and Canada in 2016, but production from its main Pilbara mine in Australia is expected to fall to 330.0 tonnes to 340.0 tonnes in 2017 from the previous 350.0 million tonne target.
That is due to the delay at the AutoHaul project at Pilbara which, when operational, will be the world's first fully-autonomous heavy haul, long distance railway system that can transport the company's production and provide extra long-term capacity that will mean less investment will be needed in the future.
Pilbara provides the bulk of Rio Tinto's iron ore production, making the delay significant, but the company does currently produce a small amount from its operations in Canada. Rio Tinto did not provide global iron ore production guidance for 2017.
"With the delay in AutoHaul, production from the Pilbara is now expected to be between 330.0 and 340.0 million tonnes in 2017, subject to final productivity and capital expenditure plans," said the company.
Looking at the most recent production results covering the first quarter of 2016, Rio Tinto said iron ore production was 13% higher than a year earlier, but 4% lower than the final quarter of 2015. Similarly, iron ore shipments were 11% higher year-on-year but down 12% quarter-on-quarter.
Rio Tinto, on a 100% basis, produced 84.0 million tonnes of iron ore in the first quarter and shipped 80.8 million tonnes.
The miner said production was higher than a year earlier thanks to the completion of some brownfield developments and expanded infrastructure capacity in the Pilbara in 2015, but were lower than the prior quarter due to "normal seasonal factors."
Production also ran ahead of shipments in the quarter due to seasonal re-stocking and weather disruptions from Tropical Cyclone Stan, but Rio Tinto said its inventory at port returned to "optimum levels" in the first quarter as a result.
Aluminium was the only commodity to report a rise in production both year-on-year and quarter-on-quarter in the first three months of 2016. Production totalled 887,000 tonnes in the period, which was up 10% from a year earlier and 3% higher than the last quarter of 2015.
Bauxite production amounted to 11.1 million tonnes in the quarter, which was up 6% year-on-year but 1% lower than the previous quarter.
Rio Tinto's production guidance for aluminium, bauxite and alumina remains unchanged for 2016 at 45.0 million tonnes, 7.8 million tonnes and 3.6 million tonnes, respectively.
Mined copper production of 141,200 tonnes was 2% lower from a year earlier but significantly higher than the last quarter of 2015. The 27% quarter-on-quarter lift was driven by higher grades at Kennecott, improved throughput and water availability at Escondida and an improved share of production from Grasberg.
The Kennecott mine is in the US, the Escondida mine is a joint venture with fellow London-listed major BHP Billiton PLC in Chile and Grasberg is in Indonesia.
Rio Tinto's share of mined copper production for the full year is still expected to be around 575,000 to 625,000 tonnes in 2016, and its refined copper production guidance also remains unchanged.
Production of hard-coking coal amounted to 2.0 million tonnes in the first quarter of 2016, which was 1.0% lower year-on-year but 4% higher from the previous quarter. Production of semi-soft and thermal coal was down 3% year-on-year and 8% lower from the previous quarter, totalling 5.5 million tonnes.
Importantly, Rio Tinto completed the divestment from the Bengalla coal mine and sold the Mount Pleasant coal mine during the quarter.
For the full year, the company's guidance covering its share of hard coking coal remains unchanged at 7.0 to 8.0 million tonnes. Full year semi-soft coking coal will still be in the region of 3.3 to 3.9 million tonnes and thermal coal production is expected to be in the range of 16.0 to 17.0 million tonnes in 2016.
Rio Tinto said its thermal coal production guidance has taken into account the sales that were completed during the quarter.
Moving to exploration and evaluation work, Rio Tinto said pretax and pre-divestment expenditure on exploration totalled USD128.0 million in the quarter compared to USD126.0 million a year earlier.
Of that expenditure, 40% was spent on diamonds and minerals, 24% was spent on copper and coal, 3% on aluminium and 5% on iron ore, with the rest being spent on "central exploration," the company said.
"The bulk of the exploration spend in this quarter was focused on copper targets in Australia, Botswana, Chile, Kazakhstan, Mexico, Namibia, Peru, Russia, the United States and Zambia. Mine-lease exploration continued at a number of Rio Tinto managed businesses including Pilbara Iron, Rio Tinto Coal Australia, Richards Bay Minerals, Oyu Tolgoi, Kennecott and Weipa," said Rio Tinto.
Rio Tinto shares were trading up 1.4% to 2,299.0 pence per share on Tuesday afternoon.
By Joshua Warner; [email protected]; @JoshAlliance
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