Rio Tinto shares fall as it cuts iron ore guidance on bad weather and rail works

 
Courtney Goldsmith
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to go with AFP story: Technology-Austral
Rio Tinto is working to automate its train system (Source: Getty)

Rio Tinto reduced its iron ore shipments guidance by up to 10m tonnes after weather-related disruptions and rail works from the first quarter continued to impact the mining giant.

The figures

Iron ore shipments in the second quarter were down six per cent year-on-year but up one per cent from the previous quarter at 77.7m tonnes.

Hard coking coal fell two per cent from the previous quarter and 14 per cent from the previous year at 1.55m tonnes due to damage from Cyclone Debbie.

Mined copper at the Escondida mine recovered well after a strike as production soared 48 per cent from the previous quarter at 124,700 tonnes, but it was still six per cent lower compared with the previous year.

Rio's FTSE 100-listed shares were down 1.74 per cent at 3,412p in morning trading.

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Why it's interesting

Rio's operations were impacted by damage from Cyclone Debbie in Australia. Sections of its rail network were hit by "significant" rainfall in the first quarter. Further maintenance to modernise the network with an automated train system will continue in the second half.

As a result, the miner has lowered its iron ore shipments guidance for 2017 to around 330m tonnes, down from 330m to 340m tonnes, and it has cut its full-year production target for hard coking coal to 7.2m to 7.8m tonnes.

Mined copper production recovered in the second quarter due to a ramp up of production at the Escondida mine in Chile, which it owns with BHP Billiton. The mine was hit with crippling strikes in the first quarter, but operations have now returned to "normal" levels, Rio said.

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What Rio Tinto said

Chief executive Jean-Sebastien Jacques said:

This was a solid quarter for production, including record output at our bauxite operations. Iron ore production was in line with last year, although iron ore shipments were impacted by an acceleration in our rail maintenance programme following poor weather in the first quarter.

We believe our focus on capital discipline, maximising cash flow from operations, driving productivity and portfolio shaping will continue to support the delivery of strong cash generation and shareholder returns.

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