core sector communique

Second quarter 2010 operations review

 

Chief executive Tom Albanese said: “2010 continues to shape up well for Rio Tinto and we are driving our operations at close to capacity. Markets for most of our products are strong and the overall long term demand outlook is positive. But in recent weeks, fears about a possible double-dip recession in OECD countries and a slight slowdown in Chinese growth have led to some weakening in sentiment. We believe this pattern of volatility in the global economy is set to continue. 
 
“Growth is firmly back on our agenda. We have a large range of options for expansion and investment competing for capital. Now that much of the uncertainty over the Australian resource tax has been removed, we are starting to move ahead with projects there with the announcement today of $200m of funding to prepare for the expansion of our Pilbara operations to 330 million tonnes a year.”

• Rio Tinto’s global iron ore production was two per cent lower than the second quarter of 2009. First half production was 15 per cent higher than the first half of 2009 when markets were recovering from the global financial crisis.
• The Pilbara system continued to operate at close to its nameplate capacity during the quarter with production for the 12 months to 30 June 2010 exceeding 219 million tonnes (100 per cent basis).
• Mined copper and gold production were down 19 per cent and 34 per cent, respectively, on the second quarter of 2009 primarily due to lower grades at Kennecott Utah Copper and Grasberg.
• Molybdenum production was 14 per cent higher than the second quarter of 2009, attributable to higher grades at Kennecott Utah Copper.
• Bauxite production increased 10 per cent on the second quarter of 2009 and production levels were sustained for alumina and aluminium, in line with improving market demand.
• Low snow and rain levels in the Saguenay region of Quebec during the first half are expected to lead to reduced power generation and the subsequent need to purchase power or curtail aluminium production. The impact on EBITDA in the second half of 2010 is expected to be approximately $100 million.
• Australian hard coking coal production was up 26 per cent on the second quarter of 2009 following increased investment at the Queensland operations. Australian thermal coal production was down four per cent on the same period.
• Uranium production was down 28 per cent on the second quarter of 2009 due to lower grades at ERA.
• A recovery in diamonds and minerals production reflected improved market fundamentals compared with the difficult conditions of 2009 when operations were idled. 
• Rio Tinto restarted the $401m (Rio Tinto share $235 million) expansion of Iron Ore Company of Canada’s concentrate capacity by 4 million tonnes to 22 million tonnes per annum by 2012.
• Rio Tinto is to invest $469 million in constructing the Kennecott Eagle nickel and copper mine in Michigan following receipt of final environmental approvals. First production is expected in late 2013.
• Rio Tinto today announced the approval of $200 million to prepare for the expansion of its iron ore operations in Western Australia, to allow dredging contracts to be issued as part of early works on the expansion of the Cape Lambert port, supporting the Pilbara operations’ overall capacity increase to 330 million tonnes a year (Mt/a) and beyond. 

All currency figures in this report are US dollars, and comments refer to Rio Tinto’s share of production, unless otherwise stated


About Rio Tinto
 
Rio Tinto is a leading international mining group headquartered in the UK, combining Rio Tinto plc, a London and NYSE listed company, and Rio Tinto Limited, which is listed on the Australian Securities Exchange.

Rio Tinto's business is finding, mining, and processing mineral resources. Major products are aluminium, copper, diamonds, energy (coal and uranium), gold, industrial minerals (borax, titanium dioxide, salt, talc) and iron ore. Activities span the world but are strongly represented in Australia and North America with significant businesses in South America, Asia, Europe and southern Africa.