Mining giant Rio Tinto faces uphill battle to hit iron ore guidance
The mining heavyweight, led by Jakob Stausholm, has warned of an uncertain future as tariffs bite but points to green shoots in China.
Rio Tinto remains optimistic about the strength of the Chinese economy as it braces for the impact of US president Donald Trump’s tariffs on global trade.
The iron ore, copper, aluminium and now lithium producer said there was limited impact on its commodities in the March quarter.
“However, there is an uncertain future impact from tariffs on the commodity markets going forward,” Rio said.
The mining giant said China had set a similar growth rate as last year, with policy support to aid the pivot from exports to domestic consumption.
It noted China’s property sector was showing signs of stabilisation through improvements in new home sales and the drawdown of inventory.
“Compared to the same period last year, there was growth in most other sectors, including infrastructure, consumer durables and manufacturing,” Rio said.
In terms of the US, Rio said the economy performed solidly by consumer spending and the housing market showing signs of recovery.
“Going forward, economic activity may be affected by tariffs,” it warned.
In Australia, Rio ran out of room to stockpile iron ore after a string of cyclones shut down its ports for long periods and is one more major production blow from missing 2025 guidance.
The mining giant is counting the cost of four cyclones that hit the Pilbara region in Western Australia in the March quarter, and is keeping a close eye on Cyclone Errol as it hovers off the coast in WA’s far north.
Rio warned on Wednesday that its Pilbara iron ore guidance remained subject to the timing of mining approvals and indigenous heritage clearances, and said it had limited ability to mitigate further weather-related losses.
The operations provide the lion’s share of Rio earning are running 13 million tonnes behind schedule after exporting 70.7 million tonnes of in the three months to March 31.
Rio expects to incur $US150m ($236.6m) in mitigation cost as it plays catch up in trying to reach the lower end of its 323 million-338 million tonne guidance for 2025.
The mitigation costs include port repairs and hiring contractors to help with boosting production after the worst start to the year in iron ore in 10 years.
Rio’s export terminal at East Intercourse Island was shut for five weeks for repairs, and its other ports closed for about a fortnight in total.
The cumulative effect meant Rio ran out of room to put iron ore and had to cut back mining.
Rio’s 17 mines in the Pilbara would normally have been better prepared to cope with cyclone disruption but were soaked by heavy rainfall in the December quarter, forcing Rio to draw down on mine stockpiles.
Rio released its first quarter results as activist hedge fund Palliser Capital briefed shareholders on a push to ditch the company’s dual-listed structure.
Rio said the takeover of lithium producer Arcadium in March increased the group’s net debt by about $US7.6bn, including the $US6.7bn acquisition price and the consolidation of Arcadium’s $US900m debt.
Chief executive Jakob Stausholm has bet big on lithium while working on a strategy to reduce the company’s reliance on iron ore.
Palliser’s motion calling for a transparent review of the dual-listed structure will be put to a vote at the Australian annual general meeting in Perth on May 1.
London shareholders have already voted, but the result will not be known until after the Perth vote.
Rio directors defended secrecy around tax affairs and highlighted the value of about $14.2bn in franking credits on its balance sheet to Australian self-funded retirees at the London meeting.
The Palliser motion requires a 75 per cent majority of PLC (London) and Australian shareholders to pass, with the result to hinge on the London vote given 77 per cent of shareholders own the PLC stock.
Under the Rio structure in place since 1995, all profits and assets are shared between the London and Australian companies and shareholders are treated equally.
However, the ASX-listed shares have traded at a premium attributed to franking credits, unique to Australia’s dividend imputation system.
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