Rio Tinto (ASX, LON, NYSE: RIO) signalled on Friday a recovery in China’s economy as it reported improved shipments of iron ore to the country, but cut its forecast for annual copper output citing coronavirus-related disruptions.
The company, the world’s top iron ore miner, posted
higher-than-expected output of the steelmaking ingredient for the first three
months of the year. Production stood at 77.8 million tonnes, up 2.4% from the
same period last year, despite a cyclone tearing through Rio’s Western
Australian operations in February.
The miner, which makes most of its profits from China, shipped
72.9 million tonnes of iron ore in the three months to March, up 5.5% from a
year ago, yet lower than some analysts had expected.
“Demand in China continues to recover,” chief executive, Jean-Sébastien
Jacques, said in a statement. He added that the group’s customer order books “remained
healthy.”
Just as most global miners, Rio has been hit by the coronavirus
crisis. In March, it suspended operations at its mines in South Africa, and
slowed activity at its Canada and Mongolia units to comply with government
measures to contain the outbreak.
Copper troubles
Rio revealed that production of copper, one of its key commodities, would not reach a previous production target of between 530,000 and 570,000 tonnes. It now expects to churn out between 475,000 and 520,000 tonnes, due to repair works at its Kennecott mine in the US, which was affected by an earthquake in March.
Fears that its 30%-owned Escondida mine in Chile, the world’s
biggest copper operation, could soon take a hit, also weighed on the guidance
downgrade.
Rio also flagged copper and gold output drops at its already
troubled Oyu Tolgoi mine in Mongolia, where its carrying out an underground expansion
expected to lift production from 125,000–150,000 tonnes in 2019 to 560,000 tonnes
at peak output, targeted for 2025.
The company confirmed last year the project was running between 16 months and 30 months late and roughly $1.2 billion to $1.9 billion over budget.
It now expects to churn out between 475,000 and 520,000 tonnes of copper.
There were fresh signs of delays on Friday, after it said that it would have to bring experts into the site to rectify industrial ropes in the largest and most important access shaft to the underground mine, which is known as Shaft 2.
Those ropes service a giant elevator that allows people,
equipment and ore to move between the bottom of the mine, 1.3 km underground,
and the surface.
Rio’s subsidiary and Oyu Tolgoi operator, Turquoise Hill
Resources (TSX, NYSE:TRQ), said the covid-19 pandemic was making it hard to get
experts to the remote Mongolian mine to conduct “rectification work”
on the ropes.
”Underground development progress may be impacted by 30% as a result of travel restrictions due to covid-19 preventing experts from travelling to the Oyu Tolgoi site,” Turquoise Hill said on Thursday.
Earlier this month, Rio’s investor US hedge fund Pentwater
Capital said it would
push for a management shakeup at the operation, claiming is “a massive
devaluation” of the asset.
The giant deposit, discovered in 2001, is one-third owned by Mongolia’s
government and two-thirds held by Turquoise Hill. Rio has a 51% stake in the
Canadian miner.