Rio Tinto’s copper output remains robust in Q2; maintains guidance

Rio simply said it was making an investment decision later in the year.

It’s lonely at the top, and that’s just the problem for Rio Tinto, as there’s barely any way to get to its massive Simandou iron ore resource in Guinea.

Its Pilbara iron ore sales achieved a run-rate of nearly 330 million tonnes per annum, which is in-line with annual guidance.

The company expects its board to make a call on construction of the $US500 million plus Silvergrass mine in the Pilbara in the second half of the year. The benchmark price for the bulk commodity averaged $US52.16 per tonne during the six months to June 30.

According to Rio, semi-soft coking coal production reflects the Coal & Allied restructure in early 20161 and mine production sequencing at Hunter Valley Operations and Mount Thorley Warkworth, resulting in 8% higher production for the first half of 2016 than the first half of 2015. Rio’s share of production was 66.3 million tonnes.

The WA division shipped 82.2 million tonnes in the June quarter, which on an annualised basis, would be enough to reach the 330 million target.

The company has undergone high-level boardroom changes in 2016, with former iron ore chief Andrew Harding exiting the business as CEO Jean-Sebastien Jacques sought to stamp his mark on the group.

“The “wall of worry” appears to be getting bigger, with investors trimming some positions after a good run that has seen some markets hit new all-time highs”, said Chris Beauchamp, IG’s senior market analyst, who said the unrest in Turkey is concerning investors.

“I thought the Pilbara did very well, it was only 1 per cent below our forecasts for shipments”. Guidance was lowered to between 330Mt and 340Mt from 350Mt. Despite Chinese demand for iron ore that’s seemingly insatiable, not even it is willing to step forward. This could push iron ore to more than $60 per tonne.

Rio Tinto owns 46.6% of Simandou, with a consortium of Chinese government-owned enterprises and the World Bank owning the rest.

For the second quarter of 2016, copper production in concentrate went down to 51,700 tonnes compared with 55,300 tonnes for the same quarter in 2015.

“We continue to focus on value and maximising cashflow from our assets”, he said.

The company said that it was revising its diamond production slightly downward to a range of 18 to 21 million carats, from its previous prediction of 21 million carats.

Rio continued to feed the global glut of iron ore, as production in Australia swelled eight per cent annually to 80.9m metric tonnes in the second quarter. The Kennecott mine in the U.S., and a rare cameo from Grasberg in Indonesia, helped bolster the copper result. Rio Tinto plc has a 12 month low of GBX 1,557.00 and a 12 month high of GBX 2,640.50.

This means the company needs to improve its mining operations otherwise it could end up missing the current year’s production target of 350 million tonnes by around 11.4 million tonnes.