Iron ore company Rio Tinto plc (LON: RIO) changed its iron ore cost guidance following lower output caused by operational challenges and adverse conditions.
The Company noted that iron ore output in the Pilbara region in Australia was down by 7% in Q2, caused by tropical cyclone Veronica and a fire at Cape Lambert. This caused production for the three months to June in Australia to fall to 79.7m tonnes, while shipments fell 3% to 85.4m tonnes.
Following these developments, the Company cut its annual volume guidance to 320 to 330 million tonnes. On Tuesday, it adjusted its guidance up from $13-$14 to $14-15 per tonne.
Further, the Company adjusted its cost estimate for its Oyu Tolgoi copper project in Mongolia. It said that the estimate rose from $5.3 billion to between $6.5 and $7.2 billion, and that production would be delayed until at least 2022. This delay was attributed to what the Company described as the consideration of new mine designs and represents a delay of between 16 and 30 months.
Currently, however, copper production was down 13% in Q2, while bauxite was up 1%, aluminium plateaued and titanium dioxide production grew 31%.
Rio Tinto comments
Company chief executive J-S Jacques said,
“We saw a challenging operational performance across our portfolio in the first half, while also investing in future growth at Richards Bay Minerals and Resolution. Whilst we experienced operational and weather issues at our iron ore operations in Australia, pricing and market demand has remained robust. We remain focused on safely improving and optimising the performance and productivity of our assets in order to drive future cash flow. This, combined with our value over volume strategy and the disciplined allocation of capital, will continue to deliver superior returns to our shareholders in the short, medium and long term.”
The Company’s share price dipped 0.53% or 26p to 4,842p a share 16/07/19 15:04 BST. Analysts from Barclays Capital reiterated their ‘Underweight’ stance, Liberum Capital reiterated their ‘Buy’ stance and Deutsche Bank reiterated their ‘Hold’ stance.
Elsewhere in the mining and minerals sector, recent updates have come from; Bushveld Minerals Limited (LON: BMN), Kavango Resources PLC (LON: KAV), Anglo Asian Mining plc (LON: AAZ), Anglo Asian Mining plc (LON: AAZ) Pan African Resources (LON: PAF), Keras Resources PLC (LON: KRS), Jubilee Metals Group PLC (LON: JLP) and Ariana Resources plc (LON: AUU).