Pilbara operations produced 79.9 million tonnes (Rio Tinto share 65.0 million tonnes) in the first quarter of 2016, 12 per cent higher than the same quarter of 2015. Higher year-on-year production reflects the stronger performance following completion of the brownfield developments and infrastructure expansions in 2015. First quarter production was three per cent lower than the previous quarter.
Pilbara sales
Sales of 76.7 million tonnes (Rio Tinto share 62.5 million tonnes) in 2015 were 11 per cent higher than in the first quarter of 2015. Sales were around three million tonnes below production in the first quarter of 2016 due to seasonal restocking and weather disruptions from Tropical Cyclone Stan. Inventory at port returned to optimum levels in the first quarter. On 15 April 2016, Rio Tinto announced the extension of the Channar Mining Joint Venture with Sinosteel Corporation. This extension, together with a separate agreement for Rio Tinto to supply iron ore from the Pilbara, will enable sales of up to 70 million tonnes of iron ore to Sinosteel Corporation over the next five years.
Pilbara projects
Work continued on the Nammuldi Incremental Tonnes (NIT) project which delivers high grade, low phosphorous ore into the Pilbara Blend. The initial phase, with a five million tonne per annum capacity, commenced production in the fourth quarter of 2015 and the second phase, which will take annual mine capacity from five to ten million tonnes per annum, is due to come into production in the fourth quarter of 2016. A further investment decision on the Silvergrass project is expected in the second half of the year.
The Cape Lambert Power Station project is progressing on schedule with civil contractors mobilised. The station will provide the power required for additional infrastructure in the Pilbara. Testing and verification of AutoHaul® is continuing, with over 75,000 kilometres of mainline trials completed: however, some delays are being experienced.
Iron Ore Company of Canada (IOC)
Operational performance continued to improve at IOC. A new first quarter record for concentrate production of 2.1 million tonnes was achieved, which was an increase of 54 per cent compared with the first quarter of 2015, although 26 per cent lower than the fourth quarter of 2015 due to seasonal impacts. IOC continues to optimise production of pellets and concentrate for sale based on prevailing market conditions and demand. However, pellet production declined by ten per cent to 2.0 million tonnes when compared with the first quarter of 2015, mainly due to equipment reliability.
2016/17 guidance
Rio Tinto’s expected global shipments in 2016 are unchanged at around 350 million tonnes (100 per cent basis), from its operations in Australia and Canada, subject to weather conditions. With the delay in AutoHaul® , production from the Pilbara is now expected to be between 330 and 340 million tonnes in 2017 (previously 350 million tonnes), subject to final productivity and capital expenditure plans.
Silvergrass still on the shelf, lots of excuses to slow down development. Looks like RIO’s market share war is over. It’s making room for Vale’s 90 million tones S11d monster next year.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
