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The Future's Bright for Rio Tinto As Output Rises

Posted on: Thursday, 20 October 2005, 18:00 CDT

By JIM STANTON Deputy Business Editor

RIO Tinto, the world's second-biggest mining group, has seen demand for steel from soaring Asian economies drive a record 18 per cent jump in quarterly output of iron ore.

The Anglo-Australian group said it was running its ore operations at full-speed to keep pace with demands for the mineral, a key ingredient in steel.

Rapidly-expanding economies in China and India are fuelling the need for steel for housing and other infrastructure projects.

Iron ore output rose to 32.2 million metric tonnes in the three months to the end of September, from 27.3m tonnes a year earlier, Rio, which supplies a quarter of China's iron ore imports, said.

The group said its Hamersley operations in Western Australia - which Rio is spending GBP 768 million on to boost capacity - shipped record volumes of iron ore, boosted by new infrastructure at its Dampier port and completion of the Yandicoogina expansion.

Iron ore is a major driver of Rio Tinto's profits, especially after prices set in annual talks with Japanese buyers rose 71.5 per cent from April this year.

Analysts are forecasting the firm will book net profit of GBP 2.73 billion for 2005.

"Iron ore demand is still strong, and Rio's got more production in the pipeline, so the outlook is good," said Atul Lele, at White Funds Management.

Output of refined copper was up by eight per cent in the quarter, compared with a year ago, to 89,200 tonnes, Rio Tinto said. This was helped by the end of maintenance at its Kennecott smelter in the United States.

"The strong operational performance of the first half of the year continued through the third quarter with most operations producing at, or near, capacity," Rio said, adding that demand for iron ore "remained strong for all products in all markets".

China, which is preparing to host the 2008 Olympic Games, has seen demand for steel rise by around an average of 20 per cent a year over the past five years.

In fact, demand from China accounted for about 13 per cent of Rio's first-half sales compared with nine per cent the year before. Mined copper production increased 12 per cent to 195,400.

Alumina production was 725,000 tonnes, up from 530,000 in the same year-earlier period, but less than the second quarter's 779,000 tonnes.

"Demand remained strong for all products in all markets, underlined by the move by [South Korea's] POSCO to renew long-term sales contracts ahead of their expiry," the company said.

Investec Securities analyst Nick Hatch said: "The figures were broadly in line with expectations."

THE FACTS: Rio Tinto comprises a number of wholly owned subsidiaries, including Borax, Comalco, Hamersley, Rio Tinto Coal Australia, Kennecott and Rio Tinto Iron & Titanium.

Among the products the firm mines are: aluminium, copper, diamonds, coal, uranium, gold, industrial minerals (borax, titanium dioxide, salt, talc and zircon), and iron ore.

The group's activities span the world but are strongly represented in Australia and North America with significant businesses in South America, Asia, Europe and southern Africa. It has one UK operation at Anglesey, in Wales.

Rio Tinto was formed in 1962 by the merger of two British companies, the Rio Tinto Company, which had been founded in 1873, and the Consolidated Zinc Corporation, which was incorporated in 1905 into the company in 1905.

Source: Evening News; Edinburgh (UK)

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