Rio Tinto in overdrive on commodities surge

[] — RIO TINTO on Thursday maintained its 2010 production guidance for iron ore at 234 million tonnes, and said it was driving all its divisions near or above capacity to cash in on strong mineral prices.

Rio Tinto is the world’s second-largest miner of the steel-making raw material behind Brazil’s Vale. Iron ore, whose price rose 4.6% during the third quarter, made up about 28% of Rio’s sales in 2009.

“This quarter we achieved record production in iron ore, alumina and coking coal,” CEO Tom Albanese said in the production report.

Analysts said the report pointed to continuing growth, driven by the insatiable resources appetites of giant Asian economies China and India.

“The biggest factor in the post-global financial crisis recovery – the urbanisation of China and India – is ongoing and should drive reasonable growth in the iron ore and steel markets for the foreseeable future,” said Resource Capital analyst Trent Allen.

“This production report points the way for Rio to show a very strong rebound in both production and profits in 2010 and the same for BHP,” said a Sydney-based analyst who asked not to be named because he is not authorised to speak to media.

BHP Billiton, the world’s third biggest iron ore miner, is due to report quarterly production data on Oct. 20.

“Albanese and Kloppers (BHP’s chief executive) are rightfully putting the pedal to the metal on everything,” the analyst said.

On an attributable basis, Rio Tinto said it should see total iron ore production of 179 million tonnes in 2010.

The company produced 47.6 million tonnes of iron ore in the third quarter, versus 46.9 million tonnes a year ago, most of that shipped to steel mills in China and other parts of Asia.

Rio Tinto owns the majority of its iron ore mines outright through its Hamersley unit, but also operates some in partnership with Australian, Japanese and Chinese investors.

China’s iron ore imports jumped 17.9% in September from the previous month, showing that state-imposed steel production cuts had failed to dent demand from the world’s top buyer.

Rio Tinto’s Australian-listed shares hit a two-year high on Thursday and ended up 4.4% at A$82.08, boosted by the Chinese data and outlook.


The global iron ore market has stabilised after a volatile period extending from the global financial crisis to the collapse of the annual benchmark pricing system and the introduction of quarterly iron ore contracts in the second quarter of this year, according to Resource Capital Research in Sydney.

Earlier on Thursday, fellow Australian iron ore miner Fortescue Metals Group said September quarter iron ore shipments rose 8%, also on strong demand from steel mills in China and other countries.

“The market is now strengthening from where it was at the end of the latter part of the last quarter,” said Russell Scrimshaw, executive director of Fortescue.

A dark spot on the mostly upbeat report was data showing mined copper and gold production fell 19% and 33%, respectively, from the third quarter of 2009, chiefly due to lower ore grading at the Grasberg joint venture with Freeport-McMoran in Indonesia.

Copper prices zoomed 26% in three-month London Metal Exchange trading in the third quarter have have continued to go up in October. Gold over the same period climbed 10% and a further 4% in October.

Base metals rose in London, New York and Shanghai again on Thursday, with copper at new 27-month peaks on COMEX and the LME, and at its highest level in China since January.

Rio Tinto also reported a 6% drop in mined and refined copper output from its 30%-owned Escondida mine in Chile.

BHP Billiton controls 57.5% of the mine.

In 2010, Rio Tinto’s share of mined and refined copper production is expected to be 660,000 tonnes and 380,000 tonnes, respectively, it said.

Rio Tinto also forecast its share of aluminium production in 2010 to be 3.8 million tonnes, and alumina 9.4 million.