Rio Tinto trims iron ore shipment guidance as production hits record high

Rio Tinto has tweaked its guidance for iron ore shipments, citing problems with its port and rail infrastructure.

Rio Tinto’s Weipa mine project.

Rio Tinto has delivered a soft third quarter production report, cutting iron ore and copper guidance as it continues to struggle to get its Pilbara iron ore port and rail infrastructure humming and as labour and operational challenges loom at the Grasberg copper mine in Indonesia.

In the three months to September 30, the mining giant said its Pilbara ore production, including minor partners’ share, rose 2 per cent against last year’s corresponding number to 83.2 million tonnes. But not all the iron ore got to customers, with shipments down 5 per cent to 80.9 million tonnes owing to apparently unexpected “port and rail maintenance”.

This was about 4 million tonnes shy of Deutsche Bank expectations.

For the year to date, Pilbara iron ore production is up 7 per cent and shipments have risen 3 per cent.

The development forced Rio Tinto (RIO) into what is becoming an increasingly regular trimming of iron ore guidance. Full-year shipments are now expected to be between 325 million and 330 million tonnes, down from 330 million tonnes previously. To reach the lower end of the range, the miner will need to ship 85.1 million tonnes in the fourth quarter.

Rio Tinto says it can still iron ore produce between 330 and 340 million tonnes in 2017, subject to final productivity and capital expenditure plans.

In copper, Rio cut its full-year production forecast from a range of 545,000 to 595,000 tonnes to between 535,000 and 565,000 tonnes.

Lower grades at Escondida, a different type of ore being processed at Oyu Tolgoi and “labour issues and operational challenges” at the controversial Grasberg mine in Indonesia appeared to be the contributing factors for the copper downgrade.

Rio Tinto logged stronger output results through most units in the third quarter, with bauxite and titanium dioxide slag production up 10 per cent, aluminium rising 11 per cent, copper climbing 16 per cent and hard coking coal up 17 per cent.

The exception to the positive quarterly results was semi-soft and thermal coal, with output in that unit sliding 2 per cent.

“We have delivered strong quarterly production, underpinned by improving operational performance across our Tier 1 portfolio,” the miner’s chief executive Jean-Sebastien Jacques said.

“Output from our iron ore and bauxite assets reflects the drive for productivity and operational excellence. With a continued focus on value, we will seek further productivity improvements across the business.”

Rio narrowed guidance for diamond output from 18 to 21 million carats to 18 to 20 million carats.

It did, however, raise its target for bauxite production from 45 to 47 million tonnes