Analysts are revising downwards their forecasts for Rio Tinto’s full year profit amid a continued easing in prices even though the mining giant has reported record annual iron ore production.
Rio Tinto on Tuesday reported it had easily beaten its full year iron ore output guidance despite extreme weather in Western Australia’s Pilbara region in the first half.
A record 65 million tonnes (Mt) of iron ore was mined in the December quarter, bringing full year output to 245 Mt.
The company had forecast iron ore production of 240 Mt for calendar 2011, while UBS analysts expected 242 Mt.
City Index chief market analyst Peter Esho said Rio Tinto’s major iron ore expansion program in the Pilbara meant it was increasingly exposed to prices for the steel making commodity, which had softened recently .
Mr Esho said there was currently substantial steel supply in China, so it may take some time for iron ore demand to rise.
Accordingly, analysts may revise expectations that Rio Tinto will next month book a $US15.8 billion full year net profit, up from a record $US14.32 billion in 2010.
“I think expectations will probably be hosed down,” Mr Esho told AAP.
“That’s not a strike against Rio Tinto. It’s probably more a reflection of the market having numbers that are perhaps a little bit too ambitious.”
Fortescue Metals Group on Tuesday reported a sharp fall in the price it received for iron ore in the December quarter to $US122, compared to a record spot price of about $US200 a tonne during the mining boom.
Mr Esho said Rio Tinto’s production report released on Tuesday was in line with expectations, although copper and coal output was slightly disappointing.
Rio Tinto chief executive Tom Albanese said in a statement that severe weather in the first half had hampered the miner’s coal operations in NSW and Queensland, although production had since bounced back.
Hard coking coal production was two per cent lower year-on-year due to flooding while full year thermal coal output was down by three per cent, due mainly to a four-week equipment failure, maintenance work and a temporary shutdown as part of expansion activities.
Semi-soft coal production slipped seven per cent, year-on-year.
Production at Rio Tinto’s copper projects fell sharply after a work stoppage and lower ore grades at the Escondida mine in Chile, while ore grades were variable at its Kennecott Utah operations in the United States.
The large Grasberg copper and gold operation in Indonesia was also hampered by industrial action, Rio Tinto said.
Rio Tinto reported a seven per cent rise in full year bauxite production and a one per cent lift in annual aluminium output, although alumina production was one per cent lower compared to 2010.
Shares in Rio Tinto closed up 81 cents at $65.70.
