Rio Tinto Unveils Production Increases and Cost Cuts
Diversified miner Rio Tinto (NYS: RIO) unearthed record production of 63 million tons of iron ore in the third quarter at the company's Pilbara mine complex in Western Australia, revealing progress toward the company's goal of expanding the mine's output to 283 million tons per year by late 2013.
In its third-quarter operational update, the world's second-largest iron ore supplier noted that stockpiles of the steelmaking ingredient increased throughout its iron ore operations as mine production outpaced sales. Chinese demand for this and other key commodities has slackened considerably over recent months, though Rio Tinto CEO Tom Albanese recently forecasted that China's "deceleration is probably bottoming out."
The miner recorded production increases across much of its product portfolio. Mined copper output increased 21% over the prior-year quarter, although refined copper volume grew by only 2%. On Monday, Rio Tinto and Turquoise Hill Resources (NYS: TRQ) -- the shares of which are majority owned (51%) by Rio Tinto -- both rejected an effort by Mongolia's minister of mining to renegotiate the investment agreement regarding the Oyu Tolgoi copper, gold, and silver development project. Construction at Oyu Tolgoi was 94% complete by the end of July, and the mine will count among the world's largest sources of copper after reaching commercial production (projected) during the first half of 2013.
Rio Tinto's bauxite and alumina production expanded by 13% and 20%, respectively, while aluminum production suffered an 11% decline to 855,000 tons. The company's Rio Tinto Alcan subsidiary in Québec resolved a lengthy labor dispute in July, and the affected operations had not yet returned to full capacity by the end of September.
Coal production results were mixed, with a 21% increase in thermal coal output set against a 13% decline in output of coking coal as a result of both mechanical setbacks and a planned plant shutdown. Titanium oxide production rose by 5%, helped by the miner's $1.7 billion purchase of BHP Billiton's (NYS: BHP) former stake in South African mineral sands mining venture Richards Bay Minerals.
Also on Tuesday, a union official in Paris -- after meeting with Rio Tinto representatives -- told reporters that Rio Tinto plans to scale back costs and jobs "on the order of 30% on average by the end of 2013." Albanese had indicated last week that his company was "getting tougher on costs," and that further job cuts would likely be required. Rio Tinto also confirmed that no new capital projects will be approved in the near term, and that the company's $16 billion budget for capital expenditures in 2012 will stand as a multi-year peak.
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