By Prashant Mehra
(Australian Associated Press)
Mining giant Rio Tinto will boost iron ore production in 2016 while keeping a tight rein on costs to help it edge ahead of its struggling global rivals.
The world’s second largest iron ore miner aims to lift production and shipments of the steel-making commodity to around 350 million tonnes this year, despite the continuing slump in prices.
The forecast came as Rio reported an 11 per cent rise in iron ore shipments to 336.6 million tonnes for 2015, narrowly missing its guidance of 340 million tonnes.
Chief executive Sam Walsh said with markets remaining challenging, Rio was focused on costs.
“We will continue to focus on disciplined management of costs and capital to maximise cash flow generation throughout 2016,” he said in a statement on Tuesday.
Last week, Rio Tinto announced it would freeze all staff pay, tighten contractor payments and slash travel expenditure as it stepped up efforts to ride out the commodities slump.
Rio’s aim to produce and ship around 350 million tonnes of the steel-making commodity in 2016 implies a seven per cent increase in production and four per cent rise in shipments.
During the December quarter, its iron ore shipments rose 11 per cent to 91.3 million tonnes, outpacing its quarterly production of 87.2 million tonnes, as the company drew on its stockpiles.
Rio’s latest quarterly production report came as data out of China, Australia’s biggest iron ore customer, showed economic growth running at its slowest pace in nearly seven years.
China’s crude steel output fell 2.3 per cent during 2015, the first drop in over 30 years.
CMC Markets chief market strategist Michael McCarthy described Rio’s December quarter as fairly solid, but warned the numbers suggested its rate of expansion may be slowing.
“They may be reaching the limit on efficiency gains,” he said.
Rio, along with rivals BHP Billiton and Brazil’s Vale, has pushed up production in recent years, despite falling prices, in an effort to corner the global iron ore market.
While all three global miners have been hit by iron ore prices sliding from more than $US100 a tonne in May 2014 to around $US40, BHP and Vale have had to confront further troubles in recent months.
BHP has had to write down the value of its US shale assets amid collapsing oil and gas prices, while Vale’s balance sheet has been under pressure as it struggles to pay for a mine expansion programme.
Both companies also face hefty fines and damages after a deadly dam disaster at their joint venture mine in Brazil.
Rio itself has moved to sharply cut capital expenditure and costs as it looks to stay ahead of falling prices for iron ore, its key export.
Rio’s shares closed 13 cents higher at $38.82.
LOWER COSTS HELP DRIVE PRODUCTION UP FOR RIO IN 2015
* Iron ore up 11 pct to 327.6m tonnes
* Hard coking coal up 11 pct to 7.86mt
* Bauxite up 4.0 pct to 43.7mt
* Aluminium up 1.0 pct to 3.3mt
* Semi-soft and thermal coal flat at 22.3mt
* Copper down 16pct to 504,400t