Rio Tinto Mulls Iron-ore Push Amid Brazil Cutbacks
09 May 2019 - 4:48PM
Dow Jones News
By Rhiannon Hoyle
PERTH--Rio Tinto PLC (RIO.LN) is closely monitoring iron-ore
mining disruptions in Brazil to determine whether it should
accelerate any projects to increase its own production, and should
have a clearer idea by the end of this year, said Chief Executive
Jean-Sebastien Jacques.
Exports of the steel ingredient from Brazil, one of the world's
top iron-ore mining hubs, have fallen as mining giant Vale SA
(VALE) cut production in the wake of a deadly waste-dam disaster in
January in the rural Brazilian town of Brumadinho.
"There's a lot of uncertainty around Vale. We don't know what
the regulator is going to be doing in Brazil," Mr. Jacques told
reporters following an annual shareholder meeting in Australia. "By
the time we get to the end of this year, we will have a better
assessment of the supply-demand balance and if it makes sense to
push harder or not."
He said there's plenty of options for the Anglo-Australian
miner, the world's top exporter of iron ore alongside Vale, to
consider across its 16-mine iron-ore network in northwest
Australia, including accelerating the second phase of a new US$2.6
billion iron-ore mine in the Australian Outback that will be the
miner's most high-tech operation to date and was intended to buoy
future production as older pits are depleted.
Iron-ore prices have surged on a shortfall as Vale cut
production. In March, Vale said it expects minimum 2019 sales of
307 million metric tons, compared with last year's total of 309
million tons. The company's prior guidance for this year was 382
million tons.
The miner recently reported a sharp fall in first-quarter
iron-ore production, which was down 11% on the year-earlier period
and 28% on the three months immediately prior.
As a result, iron ore is trading around its highest price since
mid-2014. The price for the steelmaking ingredient has risen by
roughly 30% during 2019.
Rio Tinto has, however, faced some of its own operational
setbacks. It recently scaled back its 2019 target for iron ore
production after a cyclone and port fire disrupted Australian
operations.
Still, strong iron-ore prices have led shares to rise sharply.
Rio Tinto's Australian stock last month notched its highest value
since 2008.
Mr. Jacques said Rio Tinto is more leveraged to, and
consequently focused on, market prices versus its production
volumes. Every US$10-a-ton move in the iron-ore price generates an
extra US$2 billion in free cash flow for the miner, which sells
some of the most profitable iron ore in the world and relies on the
market for the bulk of its profits.
"What the team is always doing is, as we have done in the past,
is to assess if we add additional volume what will be the impact on
the price," he said.
Ultimately, "the value over volume mantra will remain for us,"
said Mr. Jacques.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
(END) Dow Jones Newswires
May 09, 2019 02:33 ET (06:33 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
Rio Tinto (LSE:RIO)
Historical Stock Chart
From Apr 2024 to May 2024
Rio Tinto (LSE:RIO)
Historical Stock Chart
From May 2023 to May 2024