Bloomberg News

Rio’s Iron Ore Output Rises 5%, Coal Mines Recover From Floods

October 13, 2011

Oct. 13 (Bloomberg) -- Rio Tinto Group, the world’s second- largest mining company, said third-quarter iron ore output rose 5 percent and coking coal production reached a record, recovering from severe weather in Australia earlier in the year.

Iron ore production increased to 49.8 million metric tons in the period from 47.6 million tons a year earlier, the London- based company said today in a statement. That compares with UBS AG’s estimate of 48.6 million tons and RBC Capital Markets’ projection of 49.9 million tons.

“The fundamentals are holding up well, particularly for bulk-traded commodities” such as iron ore and coal, Chief Executive Officer Tom Albanese said in the statement, adding that Rio is “mindful of current market volatility.” Iron ore prices may climb above $200 a ton on “severe shortages” of the steelmaking material, Standard Chartered Plc said last month.

“Rio remains our preferred diversified exposure for iron ore leverage and balance-sheet flexibility,” Clarke Wilkins, a Sydney-based analyst at Citigroup Inc., said today in a report. Citigroup maintained a “buy” rating on the stock and a target price of A$100 a share.

Rio gained 2.8 percent to close at A$69.34 in Sydney trading, trimming its decline this year to 19 percent. The stock dropped 2.3 percent to 3,283.5 pence in London.

Profitable Ore

“We expect Rio, and the other majors, to continue to ship very profitable iron ore tons,” Michael Shillaker, a London- based analyst at Credit Suisse Group AG, said in an Oct. 11 report.

Vale SA, the world’s biggest iron ore exporter, last month forecast demand will remain strong because of growth in the Chinese economy and infrastructure investment. Rio also last month kept its long-term demand outlook for aluminum, copper and iron ore, saying it will double over 15 to 20 years as China, the biggest metals consumer, continues to industrialize.

Heavy rain in Australia slowed mining in the first half and curbed shipments from the country, the world’s biggest exporter of iron ore and coal. Rio’s third-quarter production of steelmaking coal rose 14 percent to a record 2.77 million tons and iron ore sales from Western Australia’s Pilbara region also advanced to an all-time high, the company said.

“We have set new quarterly records for iron ore sales and hard coking coal production as our operations recovered from the severe weather experienced earlier in the year,” Albanese said in the statement.

Expand Capacity

Rio’s full-year iron ore output in Australia and Canada may be more than 240 million tons, subject to weather constraints, the company said. Rio, the world’s second-largest exporter of the commodity, plans to boost its capacity in the Pilbara by 48 percent to 333 million tons in 2015.

The average price of iron ore delivered to China rose 28 percent in the quarter to $175.80 a ton from a year earlier, according to prices from The Steel Index.

Mined copper production fell 32 percent to 109,300 tons, with output from the Escondida unit, the world’s largest copper mine, dropping 39 percent to 44,700 tons because of lower grades and a labor dispute, Rio said.

The company trimmed its 2011 forecast for its share of mined copper output to 522,000 tons from 539,000 tons. It share of refined copper will be 337,000 tons, according to Rio estimates. Total refined copper production for the quarter fell 36 percent to 68,300 tons.

Alumina output declined 5 percent to 2.2 million tons, while aluminum rose 2 percent to 962,000 tons, Rio said.

“Cost pressures are returning to the aluminum industry, including the effect of stronger currencies, and the higher costs of caustic, coke and pitch,” the company said.

--With assistance from Jesse Riseborough in London. Editors: Keith Gosman, Amanda Jordan

To contact the reporter on this story: Soraya Permatasari in Melbourne at soraya@bloomberg.net

To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net; Andrew Hobbs at ahobbs4@bloomberg.net.


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