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Rio Tinto faces a battle to get a year-round guide for its flagship iron ore business after heavy rains, labor shortages and a new approach to cultural heritage issues.
On Friday, in a quarterly update, the world’s largest iron ore producer said it exported 76.3 million tonnes of the steel ingredient in the three months to June, 12% less than the same period last year. previous year.
Executive Director Jakob Stausholm said Rio had faced “some challenges” in its Pilbara operations in Western Australia, including materially higher rainfall and the shortage of coronavirus-related labor that hampered its ability to incorporate spare mines into your system.
In addition, Rio lost 2 million tons of iron ore production by changing buffer zones and exclusion zones to protect areas of high cultural importance. These changes happened last year Juukan Throat Scandal, when the ancient Aboriginal rock shelters were destroyed by the expansion of a Rio mine.
As a result, the company expects iron ore shipments to be at the lower end of its targeting range of 325 to 340 million tonnes, according to one target analyst, which would be difficult to meet.
“We think something below the bottom of the range is more likely as a very strong second half [of the year] they would be needed to reach the target range after shipments in the first half were only 154 million tonnes, ”said Christopher LaFemina, an analyst at Jefferies.
Rio’s comments, however, will provide another point in iron ore prices, which have risen over the past year and achieve a record of more than $ 230 per tonne, a huge loss for the company and its rivals BHP Group, Vale and Fortescue Metals Group.
Analysts expect Rio to declare a huge dividend payment of about $ 8 billion when it reports the results for the middle of the year this month.
Iron ore is Rio’s main commodity and source of profit. Over the past year, the market has been bolstered by strong demand from China and lukewarm supply growth, as Rio and its partners have struggled to get material to market.
In Friday’s update, Rio also revealed higher production costs to its Pilbara operation. Each tonne of iron ore mined in Australia this year will cost up to $ 18.50 per tonne to be produced, compared to a previous forecast of $ 16.70 to $ 17.70. These figures exclude shipping costs and royalty payments to governments.
“The change reflects the escalation of prices of major input costs (diesel and labor), costs related to mine asset management,” Rio said.
In Oyu Tolgoi, Rio’s backward copper project in Mongolia’s Gobi Desert, the miner said the development had been affected by the pandemic and that an agreement had yet to be reached with the government on number of pending numbers before starting underground caving.
Oyu Tolgoi is Rio’s largest growth project and peak production will be one of the largest copper mines in the world.
Rio also provided an upgrade to its South African mineral sand business, which produces ilmenite, rutile and zircon, materials used in everything from paint and smartphones to sunscreen.
Rio closed Richards Bay Minerals last month and declared greater strength in contracts that mentioned the deterioration “Security situation” around the operation in KwaZulu-Natal, the home state of former President Jacob Zuma. In May, RBM CEO Nico Swart was ambushed and shot dead by gunmen on his way to work.
With all operations reduced, Rio has suspended production guidelines citing “risks around the time of resumption of operations.”
“Still, it was clearly a challenging second quarter for Rio,” LaFemina said.
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