RIO’s Q2 productio report:
Pilbara operations produced 152.3 million tonnes (Rio Tinto share 126.9 million tonnes) in the first half of 2021, 5% lower than the first half of 2020 due to above average rainfall, shutdowns to enable replacement mines to be tied in, processing plant availability and cultural heritage management. Ongoing COVID 19 restrictions and a tight labour market have further impacted our ability to access experienced contractors and particular skill sets.
Sustained wet weather had an estimated impact of around 3 million tonnes in the first half. Consistent and above average rainfall impacted mine operations, particularly at West Pilbara and Robe Valley operations. The recorded rainfall days were 30% and 70% above the five year average at Paraburdoo and Karratha respectively, while rainfall at Pannawonica was 60% above the five year average.
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The impact from shutdowns to enable replacement mines to be tied in at Western Turner Syncline and Robe Valley, and reduced processing plant availability, particularly at Yandicoogina, is estimated to be 4 million tonnes in the first half.
Execution of shutdowns was also impacted by labour shortages due to COVID-19 restrictions and high labour demand.
We continue to prioritise engagement with Traditional Owners and cultural heritage management in daily site operations.
To date, 2021 production has been reduced by around 2 million tonnes as mine plans have been amended, and buffers and exclusion zones have been incorporated to protect areas of high cultural significance. Mine plan changes have also resulted in increased production of SP-10.
Blast management plans have been developed to create smaller, higher controlled blasts to minimise vibration and protect heritage sites (approximately 11% of blasts in the first half), which has had some impact on mining productivity and materials handling. Going forward this will remain a risk factor, however we are adapting mine practices and improving productivity.
Mine production risks remain in the second half, as we complete construction and commissioning of Gudai-Darri, our first new hub in over five years, and ramp up production from replacement mines. The increased tightness in Western Australia’s labour market continues, in particular shortages of roles relating to structural, mechanical, electrical and instrumentation disciplines, which is amplified by ongoing COVID-19 travel restrictions. Despite these impacts, all projects are expected to achieve first ore in the period previously disclosed, although completion in 2021 is slightly later than planned.
First half shipments of 154.1 million tonnes (Rio Tinto share 128.6 million tonnes) were 3% lower than the first half of 2020 with some additional drawdown of inventories. Full year iron ore shipments guidance is expected to be at the low end of the range and remains subject to COVID-19 disruptions, tie-in and ramp up of replacement mines and cultural heritage management.
In June we successfully completed a planned five week maintenance shut at one of our four port terminals, East Intercourse Island (EII), slightly ahead of plan. During the shut we replaced four ‘apron feeders’ below the rail car dumper that were around 50 years old.
RIO full-year guidance is for 325-340mt so it well behind that at this stage. It conceded it will probably deliver at the lower end so to reach that it will need to up its run rate to 123mt for H2, a significant acceleration in supply of more than 50mt per annum annualised.
This is price bearish.