Rio Tinto has achieved record first half iron ore production in a result it hopes will offset plunging commodity prices.
First half iron ore production of 120 million tonnes (94mt attributable to Rio) and shipments of 115mt were both four per cent higher than the first half of 2011.
However iron ore production for the quarter of 62mt (49mt attributable), was flat compared to the second quarter of 2011 in a result in line with analysts’ expectations.
The company’s shares lost value after its quarterly report was released, closing five cents down at $54.44.
Iron ore represents at least 70 per cent of the company’s earnings and rising at a time iron ore prices are falling.
In 2011 they hit a record a record $US180 ($A176.25) a tonne but are currently hovering around $US130 ($A127.29) a tonne.
Rio has been criticised in recent times for not being diversified enough but that may help it now, with iron ore prices still historically high and proving resilient compared to other commodities.
Production costs are about $US40 a tonne but will rise as the company expands its Pilbara iron ore business to 353 million tonnes per annum.
Chief executive Tom Albanese described the second quarter result as strong with global economic conditions and sentiment dropping markedly in the second quarter.
“Our investment program remains resilient to this market volatility, as our tier one projects are robust under any probable macroeconomic scenario,” he said.
Fat Prophets resource analyst David Lennox told AAP the company should report very good half year earnings depending on the amount of production captured that makes up the difference in price variance.
The company reported full year net profit of $US15.55 billion last year but that is expected to drop to below $11 billion in 2012.
“They are lucky they are in a sweet spot at the moment … because had 70 per cent of their earnings been in aluminium or copper they story would have been very different,” he said.
Provided iron ore demand held up in China, which was expected, Rio’s earnings were safe, he said.
Elsewhere, mined copper production was five per cent higher than the second quarter of 2011, but the more important figure of refined copper production plunged 33 per cent for the first half to 123,000 tonnes amid operational issues at Chile’s Escondida.
Aluminium was 12 per cent lower than the second quarter of 2011, mostly due to the shutdown of two-thirds of capacity at its Alma refinery in Canada, following an industrial dispute with workers that has now been resolved.
Bauxite and alumina production were eight per cent and five per cent higher than the second quarter of 2011, but prices and demand in that industry are weaker due to China-led over-supply.
Production of hard coking coal – used in steelmaking along with iron ore – was 13 per cent higher than the second quarter of 2011 with its prices, and thermal coal production flat compared with the second quarter in 2011.
Rio says it expects to produce about 250 million tonnes of iron ore in 2012.
