Rio Tinto Iron Ore is currently experiencing mine operational challenges, particularly in the Greater Brockman hub in the Pilbara. The mining giant last night lowered guidance by up to 23 million tonnes from a range of 333-343Mt down to 320-330Mt.
Rio says that this is resulting in a higher proportion of certain lower grade products, partly to protect the quality of our flagship Pilbara Blend.
Around 1.5 million tonnes of these products were sold in the first quarter, as noted in the 2019 Quarterly Operations Review, 16 April 2019.
The financial impact of Rios woes means it could lose more than $US2 billion in revenues this year. If shortfalls grow to 30 million tonnes the effect on revenue could be $US3 billion or more.
Rio has also been receiving lower payments for lower quality ore sent in the current June quarter to customers. The China market has been aggressively pushing down prices. Rio’s operational challenges mean it could face higher costs this year than originally forecasted, putting additional pressure on profits.
Rio had previously revised April guidance was after the impact of Cyclone Veronica and two fires – one in January and one in March at the company’s Port lambert loading terminals in the Pilbara.
It says “in light of these challenges, there has also been a review of mine plans, resulting in guidance of Pilbara shipments (100% basis) for 2019 being revised to between 320 million tonnes and 330 million tonnes (previously between 333 million tonnes and 343 million tonnes). Given the change in volume guidance, unit costs will be updated in the Q2 Quarterly Operations Review (16 July 2019).”
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