April 17, 2012 / 6:05 AM / 6 years ago

Rio Tinto Q1 iron ore, copper miss forecasts, shares drop

SYDNEY (Reuters) - Rio Tinto (RIO.AX) (RIO.L) reported worse-than-expected falls in iron ore, copper and coal production in the first quarter after it was hit by bad weather, knocking the global miner’s shares lower on Tuesday.

Rio, the world’s second biggest producer of iron ore after Vale VALE5.SA and a key supplier to the Chinese steel sector, said Iron ore output dropped 11 percent in the March quarter from the previous three months, with cyclones hampering production and shipments in the southern hemisphere summer.

The world no.3 miner’s outlook for copper production for the full year also came in weaker than expected. Rio’s London-listed shares (RIO.L) fell 1.5 percent in early trading.

“We were expecting it to be weak, but suffice to say in summary, it’s come through weaker than we would have thought,” said UBS analyst Glyn Lawcock.

Rival BHP Billiton (BHP.AX) (BLT.L) is expected to report weather-related disruptions to its Australian iron ore operations on Wednesday.

Rio Tinto gave no detailed commentary on demand, but there have been market concerns that commodity imports by China will drop off this year in step with slowing industrial growth.

Global stock markets fell last month when BHP said it was seeing signs of flattening Chinese demand for iron ore.

China is the single-largest buyer of Australian iron ore, and Rio Tinto remains committed to a massive expansion of its iron ore operations in the Pilbara in Western Australia, where it expects to be producing at 283 million metric tonnes a year in the second half of 2013.

It won approval on Tuesday to go ahead with investing more than $300 million to expand the town of Wickham in the Pilbara to support its mine plans.


Heavy rain and two early-season cyclones drenched Rio Tinto’s Paraburdoo mines during the first quarter of 2012, while high sea swells generated by cyclones disrupted freighter movements at the ports of Dampier and Cape Lambert, used by Rio to ship all its Australian ore.

Its coal mines in Queensland and New South Wales were also drenched, knocking hard coking coal output down 35 percent to 1.7 million metric tonnes.

The impact of the bad weather was not as bad as last year, which led the company to say it had a “solid” first quarter, with increases in output from a year earlier.

Rio Tinto’s Australian-listed shares, which had been trading higher ahead of the production report, fell nearly 1 percent after the release and closed down 0.8 percent at A$64.70. The broader market fell 0.3 percent.

Rival BHP’s shares fell 0.5 percent. On top of cyclones and rain, BHP has also been hit by strikes at its Queensland coal mines, so analysts have been expecting a tougher quarter.

“BHP’s will probably be the same (as Rio), Fortescue’s will be the same, and they’ll all be a bit weak because the weather just wasn’t good,” said Hayden Bairstow, an analyst at CLSA.


Rio said its share of production from mines it owns outright and in joint ventures dropped to 45.6 million metric tonnes in the quarter versus 51.2 million tonnes in the previous quarter.

    Analysts had been expecting output closer to 50 million metric tonnes.

    Iron ore production on a 100 percent basis in the March quarter was 59 million metric tonnes versus 65 million in the previous quarter.

    The shortfall has been helping shore up seaborne-traded iron ore prices despite slowing demand from China, the biggest buyer of Australian ore.

    Mined copper output fell 13 percent to 119,500 metric tonnes against analysts’ forecasts of above 140,000 tonnes.

    Rio forecast iron ore output for 2012 would rise to 250 million metric tonnes on a 100 percent basis, up from 244.6 million tonnes a year earlier.

    Mined copper output is seen increasing to 600,000 metric tonnes, but that was more than 10 percent below some analysts’ forecasts.

    In aluminum, where Rio Tinto is one of the world’s top producers, output fell to 854,000 metric tonnes from 961,000 tonnes in the previous quarter and tonnes in the year-ago period.

    Rio signaled a major retreat from its aluminum business last October when it unveiled plans to sell 13 assets, including smelters and alumina refineries, only four years after buying aluminum giant Alcan in one of the sector’s biggest ever deals.

    Aluminum prices have shed about a fifth of their value since touching a peak of $2,800 per metric tonne in May last year and analysts estimate about 30 percent of global aluminum operations are loss-making.

    Additional reporting by Manolo Serapio in SINGAPORE; Editing by Alex Richardson

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