15/01/2009 - 13:19

Rio slumps, posts lower iron ore output

15/01/2009 - 13:19

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Shares in Rio Tinto have fallen by as much as 10 per cent today as the miner posts a significant drop in iron ore output during the fourth quarter as the global market weakened amid the global economic slowdown.

Shares in Rio Tinto have fallen by as much as 10 per cent today as the miner posts a significant drop in iron ore output during the fourth quarter as the global market weakened amid the global economic slowdown.

The world's second largest iron ore producer delivered 31.759 million tonnes during the three months to December 31, an 18 per cent drop on the previous corresponding quarter.

Rio Tinto said the decline in production, which was prompted by a drop in Chinese demand, resulted in a rise in unit costs and a general tightening of margins.

The company is planning to axe about 14,000 jobs worldwide and reduce capital expenditure by up to $US5 billion ($A7.58 billion) this calendar year to help conserve cashflow and reduce debt amid the tough economic environment.

"We are taking firm action in response to the global economic downturn and, given the resilience of Rio Tinto's low cost assets, expect to remain well positioned when recovery comes," Rio Tinto chief executive Tom Albanese said in a statement.

Rio Tinto shares dropped $4.12, or 10.15 per cent, to $36.49 by 1519 AEDT.

The company has warned that fourth quarter earnings for Rio Tinto Alcan would be negatively impacted by the sharp decline in the aluminium price, and that copper provisional pricing would impact underlying earnings by $US360 million ($A545.87 million) in the second half of 2008.

Aluminium output during the quarter climbed 21 per cent higher to 1.011 million tonnes, despite a strong performance from the company's Canadian smelters outweighed by production cutbacks in Europe and New Zealand.

Rio Tinto said it had curtailed about five per cent of its smelting capacity and would continue to assess production rates in light of the current market weakness.

Anglesey Aluminium Metal, a joint venture between Rio Tinto Alcan and Kaiser Aluminium, said on Thursday it would end smelting operations at the end of September after its power contract expires.

Rio Tinto delivered an 18 per cent drop in mined copper, with reduced rates at the Escondida mine in Chile offsetting an improved performance from the Kennecott Utah Copper business in the US.

Refined copper output rose by three per cent.

Output for hard coking coal - used in the production of steel - climbed by 40 per cent to 2.162 million tonnes as a result of higher demand and increasing port capacity.

Uranium production was 20 per cent higher as a result of better access to higher grade ore at the Ranger mine in the Northern Territory and the Rossing mine in Namibia.

Rio Tinto said evaluation work at three of its key growth projects - Simandou iron ore in Guinea, Resolution copper in the US, and La Granja in Peru - had been scaled back in light of current economic conditions.

In a rare bit of positive news from the miner, the company said it had started production of ilmenite at its QMM mineral sands operations in Madagascar.

"We are still in the early commissioning stage but expect to increase production over the coming months," Rio Tinto Iron & Titanium managing director Harry Kenyon-Slaney said in a statement.

 

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