Rio Tinto's iron ore costs up, production unchanged

Rio Tinto’s iron ore production costs were higher than expected while production volumes remained within guidance, according to the mining giant’s fourth quarter results.

The mining company’s Pilbara iron ore operations produced 321.1 million tonnes in 2022, which was one per cent higher than the previous year.

Iron ore production costs were "likely" to end up above the top end of the US$19.50 to US$21 per tonne guidance range, according to Rio.

The company cited inflation, diesel prices and labour costs as the primary reasons for the higher-than-expected production costs.

The 2023 guidance for Pilbara iron ore unit cash costs remain unchanged at US$21 to US$22.50 per tonne.

The only 2023 production guidance set to change was for copper, which had increased from 500,000 to 575,000 tonnes in 2022 to 650,000 to 710,000 tonnes.

The production guidance boost was due to the company’s increased ownership in the Oyu Tolgoi project in Mongolia from 33 per cent to 66 per cent.

Rio shipped 87.3 mt of iron ore in the fourth quarter, and 321.6 mt for 2022, which was a one per cent increase on 2021.

Rio Tinto chief executive Jakob Stausholm said several operational records were achieved in the second half across the Pilbara iron ore mine and rail system.

“Deployment of our Safe Production System resulted in improved performance at those sites and overall production was higher versus 2021 across all commodities, with the exception of aluminium and alumina,” he said.

“The acquisition of Turquoise Hill Resources strengthens our copper portfolio and demonstrates our ability to allocate capital with discipline to grow in materials the world needs for the energy transition and delivering long-term value for our shareholders.”

The company provided an update on its growth projects, with the Gudai-Darri iron ore mine in the Pilbara expected to reach its nameplate capacity in 2023 after opening in June.

The Western Range iron ore project, 54 per cent owned by Rio and 46 per cent owned by China Baowu Steel Group, has received all primary environment and Australian government approvals.

Earlier this month, Rio awarded a AU$330 million contract to Perth-based Civmec to carry out heavy engineering work for the proposed mine.

Rio is continuing to progress its next portion of Pilbara mine projects including the Hope Downs 1 and Brockman 4 mines, while expecting to complete the Rhodes Ridge order of magnitude study in 2023.

In total, it poured US$897 million into exploration and evaluation of new projects in 2022, which was US$171 million more than the previous year.

The company spent US$56 million on the Winu copper and gold project in the Pilbara and planned drilling, fieldwork and study activities ahead of applications and approvals.

Rio also worked on strengthening its relationship and advancing agreement making with Traditional Owners.

The Resolution Copper project in the US cost Rio US$122 million as it worked to progress the Final Environmental Impact Statement, land exchange actions and advanced partnership discussions with Native American Tribes as a part of the consultation process.

Negotiations at the Simandou iron ore project in Guinea towards co-development of project infrastructure progressed with a non-binding term sheet between Rio joint venture Simfer, Baowu Resources, Winning Consortium and the Government of Guinea.

Rio spent US$189 million on the project, including taking steps towards securing the shareholder agreement, cost estimates and regulatory authority approvals to progress the co-development of rail and port facilities.

Rio Tinto shares were down 1.53 per cent to trade at $120.30 at 2:48pm AEDT.