Ore deluge begins

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Rio’s Q2 production report is out and there’s no stopping the iron ore deluge. Rio confirmed its guidance for 2013 at 265 tonnes:

  • Record first half iron or production, shipments and rail volumes despite conveyor belt breakage resulting in one of five ship loaders being side-lined for almost three weeks in and unseasonal wet weather which led to flooding in the Pilbara.
  • Expansion of Pilbara capacity to 290 million tonnes per year remains on budget and on time to deliver first tonnages bu the end of the third quarter of this year. Delivery of first tonnages will be followed by a steady commissioning and ramp up period.
  • Fist half 2013 sales of 111 million tonnes set a new record for a first half and were two percent higher than the same period in 2012. Second quarter sales were lower than production due to interruptions in shipping caused by the conveyor belt breakage and significant flooding in the Pilbara.
  • Approximately 30 percent of sale were in the first half of 2013 were priced with reference to the prior quarter’s average index lagged one month. The remainder was sold either on the current quarter average, current month average or on the spot market.
  • The phase two expansion of the port, rail and power infrastructure to 360 Mt/a is currently underway. A number of options for mine capacity growth are under evaluation, including the development of new mines and incremental tonnes from further productivity at existing mines.

The battle of the billionaires will be something to watch.

David Llewellyn-Smith
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Comments

  1. Record volumes, strong prices, much weaker dollar. Doesn’t sound catastrophic for Rio, or BHP for that matter.

    The big boys can afford to keep cranking up the volumes and take a hit on price because they’d still be profitable with ore at $50. Twiggy and Gina have got to be nervous, but hey, prices are holding up so everyone’s making money at the moment.

      • Of course we don’t know where ore prices are heading in the longer term. Its all good now with ore prices holding up, a weaker dollar and record volumes, but if ore prices go much lower the majors will be less profitable and the little guys will be wiped out.

        So I don’t get these short-term profit downgrades for BHP and Rio, but longer term anything could happen.

    • We would hope that after all the CAPEX they get a retun on the investment. Someone must have done the maths before the billions spent.

      • Of course they did the math and looked at what volumes would be required going forward.
        It would be foolish to think otherwise.

        No one spends billions and billions on infrastructure they don’t think will be needed to increase future income – they want their outlay back plus a return on that infrastructure cost.

  2. Forrest GumpMEMBER

    The $AUD has fallen by 10%, by virtue of the FOREx, this has given the miners a windfall of 10% profit. On another point the new Vale (Brazil) ops will be coming on line in the coming 18 months pumping more supply into the market.