Rio Tinto PLC (LON:RIO) cut its full year copper production guidance after reporting a decline in third quarter output as grades dropped at its mines in Utah and Mongolia.
Mined copper production in the September quarter fell 3% to 120,600 tonnes compared to the same period a year ago, well below analysts’ forecasts of about 150,000 tonnes.
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The miner blamed the drop in output on lower copper grades at the Kennecott mine in Utah and the Oyu Tolgoi mine in Mongolia. Production was also hit by strike action earlier this year at Escondida, the Chilean mine it owns with BHP Billiton plc (LON:BLT).
The start of the planned Los Colarados concentrator expansion at Escondida was delayed as a result of the strikes.
Rio Tinto now expects full year mined copper production of between 460,000 and 480,000 tonnes, down from the 500,000 to 550,000 tonnes forecast previously. The cut to guidance represents lost revenue of about US$390mln even as copper prices have rebounded almost 30% in the past four months to three-year highs of about US$7,070 a tonne.
Rio reportedly in talks to sell aluminium assets to GFG Alliance
Aluminium output also declined during the third quarter, down 3% on the previous year to 887,000 tonnes. GFG Alliance is said to be circling Rio’s aluminium assets in Australia and New Zealand, the Financial Times reported.
Rio’s iron production in Pilbara, Western Australian, rose 2% year-on-year to 85mln tonnes and shipments increased 6% to 85.8mln tonnes.
Hard coking coal production from Rio’s Queensland mines rose 3% to 2.44mln tonnes from a year ago and the company left full year guidance at 7.2mln to 7.8mln tonnes. Rio has been trying to sell its Queensland coal mines after offloading its Hunter Valley thermal coal mines earlier this year.
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Bauxite output edged up 4% to 12.8mln tonnes, boosted by strong performances at the Gove mine in Northern Territory and the Weipa mine in Queensland. It lifted its full year guidance on bauxite production to 50mln to 51mln tonnes from a previous estimate of 48mln to 50mln tonnes.
CEO says Rio 'performed well'
Chief executive Jean-Sebastien Jacques said the business "performed well" in the quarter despite the drop in copper and aluminium production.
“In particular, we are making good progress with further improvements to our world-class Pilbara iron ore business, including the opening of the Silvergrass mine and the implementation of AutoHaul,” Jacques said.
“We continue to shape our asset portfolio and announced US$2.5 billion of additional returns to shareholders from the proceeds of the Coal & Allied sale, demonstrating the robustness of our strategy and ability to invest in high-value growth whilst returning excess cash to shareholders.”
Rio has announced more than US$8bn in cash returns this year. Jacques said the group’s focus on cash generation and disciplined capital allocation will continue to deliver “superior” returns for shareholders.
Shares dipped 0.08% to 3,715p in morning trading.