Iron ore and Coal

Rio's Pilbara costs rise as production falls

Rio's Pilbara costs rise as production falls
Mining News Pro - Diversified miner Rio Tinto has reported a 12% decline in iron-ore shipments and a 9% decline in production for the second quarter ended June, compared with the previous corresponding period.

Iron-ore shipments for the second quarter were down to 76.3-million tonnes, with production down to 75.9-million tonnes, while shipments in the first half of the 2021 financial year were also down 3% on the previously comparable period, to 154.1-million tonnes, while production was down 5%, to 152.3-million tonnes.

“The global economy, in particular China, recovered strongly and we are intensely focused on servicing our customers with as much product as we can. However, we faced some challenges in the first half notably at our Pilbara operations, which were impacted by replacement mine tie-ins and materially higher rainfall,” said Rio Tinto CEO Jakob Stausholm.

“Heightened Covid-19 constraints, which resulted in numerous travel restrictions, added further pressure on the business and limited our ability to access additional people, particularly in Western Australia and Mongolia, in order to deliver operational improvements or maintenance initiatives and accelerate projects,” he added.

Rio expected iron-ore shipments to be at the low end of the guidance range which remains subject to Covid-19 disruptions, tie-in and ramp up of brownfield replacement mines and management of cultural heritage.

The miner noted that progress had been made on tying in approximately 90-million tonnes of replacement mine capacity at existing hubs in Robe Valley, West Angelas and Western Turner Syncline Phase 2.

Replacement projects remain on track for completion in 2021, and Gudai-Darri is set to ramp up during 2022. However, Rio noted that the tight labour market in Western Australia had limited its access to experienced contractors and specific skill sets.

Meanwhile, Pilbara iron-ore unit cost guidance for 2021 is now A$18/t to A$18.50/t, up from the previous estimate of between A$16.70/t and A$17.70/t. The miner said that this is an underlying cost increase of around A$0.3-billion relative to prior guidance, or 4%. The change reflects price escalation of key input costs, including diesel and labour, costs related to mine heritage management, and Covid-19 related costs.

“Safety is our first priority and our performance in this area remains robust in challenging conditions. However, as identified shortly after my appointment, operationally we are not where we want to be,” said Stausholm.

“Our first-half performance has reaffirmed my belief that we have identified the right priorities to strengthen the business: to become the best operator, strive for impeccable environmental, social and governance (ESG) credentials, excel in development and secure a strong social licence. We have made initial progress against our priorities, but a large volume of work remains to make Rio Tinto even stronger, so we can continue to deliver superior returns to shareholders, invest in sustaining and growing our portfolio, and make a broader contribution to society."

Mined copper production for the quarter was also down by 13% on the previous corresponding period, to 115 500 t, and down 11% in the first half of the year, to 236 100 t, while bauxite production was down 6% in the quarter, to 13.7-million tonnes, and down 4% in the half-year, to 27.3-million tonnes.

Aluminium production in the June quarter was up 4% on the previous corresponding period, to 816 000 t, and up 3% in the interim period, to 1.6-million tonnes.

Rio on Friday said that mined copper and bauxite production is expected to be at the low end of the guidance range. Full year titanium dioxide slag production guidance has been removed as a result of risks around the timing of resumption of operations at Richards Bay Minerals (RBM) operation, in South Africa, due to an escalation in the security situation.

“We are working with the local and federal governments and police to ensure we can safely resume operations,” the miner told shareholders.

The company earlier this month declared a force majeure at RBM, halting production until the safety of its staff and operation could be assured. This followed reports of community members burning mine equipment, and the shooting death of the mine’s operational services GM Nico Swart, on May 24.

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