Monday, October 28, 2013

Rio Tinto: A Low-Cost Iron Ore Giant Eyeing Uptake In Production

By Sarfaraz A. Khan and Gohar Yousuf

The world’s second biggest mining company and one of the biggest iron ore producers Rio Tinto (
RIO) has recently posted record production result for its third quarter due to an increase in the production and shipments of iron ore, particularly in Western Australia. The company has reaffirmed its annual iron-ore production guidance at 265 million tons.

Rio Tinto has increased its iron ore production by 2% year-over-year to 68.3 million tons while global iron-ore shipments rose 4% year over year to 68 million tons. This is due to the record production of 64.3 million tons from its Australian Pilbara operations. The business is also one of the lowest cost iron ore producers, so the increase in production should help it to deliver better results for the third quarter. The details of Rio Tinto’s third quarter production are shown in the table below. 

Previously, for the six months ending in June 2013, Rio Tinto’s net profit dropped by 71% to $1.72 billion from same period of 2012 while revenue was $27 billion. The company gets most of its revenues from iron ore, followed by aluminum and copper. 

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The company has been suffering due to the lower commodity prices, higher tax rate and the fall in demand at its biggest market, China. However, the company’s aggressive cost-saving measures were able to offset some of the decline in profits.

Cost Reductions

Rio Tinto has planned to reduce its operating cost by $5 billion by …. Read full article with images at GuruFocus