Cyclone-hit Rio Tinto cuts iron ore forecast
Rio Tinto expects lower iron ore shipments from its Pilbara operations in WA in the wake of a damaging cyclone.
Rio Tinto has begun 2020 as it did 2019, announcing a big downgrade to its forecast iron ore division in the wake of a Pilbara cyclone.
Rio slashed its 2020 iron ore outlook by six to nine million tonnes, downgrading production guidance from 330-343mt to 324-334mt as the company cleans up after yet another damaging cyclone that flooded mines, caused minor pit-wall slippages, and damaged accommodation camps and port infrastructure.
Cyclone Damien swept through the Pilbara 10 days ago, hitting Rio’s Dampier and Cape Lambert port operations with 220kmh winds and tracking the company’s rail lines before dumping more than 200mm of rain over key Rio mines.
The company said on Tuesday the cyclone caused minor damage across most of its operations including impact to access roads, and electrical and communications infrastructure.
“All mine sites experienced some disruption and will take time to return to normal operation,” Rio said.
It is the second year in the row cyclone has caused a significant slowdown at Rio’s flagship iron ore operations, after the impact of 2019’s cyclone Veronica — along with an earlier fire at its Cape Lambert port facilities — cut 14mt from Rio’s expected 2019 output.
The announcement was made on April 1, was followed with a second downgrade only two weeks later, and helped push Rio’s cash production costs above those of BHP for the first time in recent history.
While the impact of Cyclone Damien is smaller than last year’s combined disasters, the downgrade will raise fresh questions over the resilience of Rio’s Pilbara network — which produced 327.6mt at a unit cash cost of $US13.7 in 2016, the year Rio chief executive Jean Sebastien Jacques took control of the company.
The company also faces fresh battles with climate activist shareholders at its upcoming annual shareholder meetings, after confirming it had submitted plans to build a 300 megawatt coal-fired power station to the Mongolian government, required by the terms of its 2009 agreement over the development of the giant Oyu Tolgoi copper mine.
Rio said it is also working on plans to offer an alternative power supply for the country, focused on renewable energy sources — but the ultimate decision remains one for the Mongolian government.
Mr Jacques has made much of Rio’s decision to exit its thermal coal business in 2017, and the announcement is likely to increase pressure on the company from climate activists and environmentally-minded investors.
It could also propel the mining major to the centre of renewed political controversy over federal government support for the construction of new coal-fired power stations in Australia, with former resources minister Matt Canavan seizing on the announcement to push the case for an Australian equivalent on Twitter.
“Today Rio Tinto announced that they were progressing a coal fired power plant in Mongolia. Why is it okay for an Australian company to build a coal fired power station in Mongolia to create jobs there, but not one to create jobs here?” Senator Canavan posted.
Rio Tinto shares closed up 47c on Tuesday, to $98.31.
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