https://www.miningweekly.com

Rio Tinto profit jumps 10% as cost-cutting focus pays off

Rio Tinto profit jumps 10% as cost-cutting focus pays off

Photo by Bloomberg

13th February 2014

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

  

Font size: - +

PERTH (miningweekly.com) – Mining giant Rio Tinto has delivered a 10% profit increase in the 2013 financial year, which ended December, as the diversified group delivered on a cost-cutting programme.

Underlying earnings rose to $10.2-billion, while operating costs improvements of $2.3-billion exceeded the 2013 target of $2-billion.

“These strong results reflect the progress we are making to transform our business and demonstrate how we are fulfilling our commitment to improve performance, strengthen the balance sheet and deliver greater value for shareholders,” CEO Sam Walsh said on Thursday.

Rio Tinto surprised investors with a 15% dividend hike, compared with analyst consensus of 7%. "The 15% increase in our dividend reflects our confidence in the business and its attractive prospects,” he added.

Rio Tinto reduced its capital expenditure (capex) by 26% year-on-year to $12.9-billion in 2013, as it wrapped up five major capital projects, including the Oyu Tolgoi copper/gold openpit mine and concentrator, Phase 1 of the Pilbara expansion, the Argyle diamonds underground mine, the Kestrel coking mine extension and the AP 60 aluminium smelter.

In 2014, Rio Tinto’s capex would be less than $11-billion and its 2015 capex would be around $8-billion.

The company was also on track to achieve the $3-billion operating cash cost improvement target in 2014.

Exploration and evaluation spend was also reduced by more than $1-billion, which exceeded Rio’s targeted reduction of $750-million. Walsh noted that evaluation spend has largely been devoted to those projects with the greatest potential to deliver value in the medium term, with spend on certain longer-date options reduced.

The group reduced its net debt to $18.1-billion at December 31, down $4-billion on the half-year and $1.1-billion down on the previous year-end. “Debt reduction to sustain a strong balance sheet will remain a priority in 2014,” the company stated.

Meanwhile, cash flow from operations was up 22% on 2012 to $20.1-billion, which reflects the cost-reduction initiatives and record volumes.

Iron-ore contributed the most to Rio’s 2013 revenue, followed by aluminium, copper, coal and diamonds.

Walsh told shareholders that Rio had set production records at its iron-ore, bauxite and thermal coal operations, while copper volumes also recovered.

Iron-ore volumes were bolstered by the completion of the Pilbara Phase 1 infrastructure expansion to 290-million tonnes, with ramp-up on track to reach nameplate capacity before the end of the first half.

Iron-ore production on a 100% basis increased by 5% year-on-year to 266-million tonnes. Rio’s share of that was 209-million tonnes. Sales of 259-million tonnes were a new record, but were lower than production volumes, owing to interruptions in shipping caused by a conveyor belt breakage, significant flooding in the Pilbara in the second quarter of 2013, and the impact of tropical cyclone activity that closed ports.

Rio expects 2014 production to increase to 295-million tonnes on a 100% basis.

The miner increased its bauxite production by 10% year-on-year to 43.2-million tonnes, its alumina output by 1% year-on-year to 7-million tonnes and its aluminium production by 7% year-on-year to 3.5-million tonnes.

Walsh said tough decisions were being taken to reshape the aluminium business. In 2013, the mining giant closed, curtailed or divested six noncore aluminium assets, including suspending production at the Gove aluminium refinery, in Australia, and shifted its focus to its bauxite operations.

Its guidance for 2014 is 41-million tonnes of bauxite, 8.1-million tonnes of alumina and 3.4-million tonnes of aluminium.

Rio's share of mined copper production rose by 15% year-on-year to 631 500 t and is expected to decline to 570 000 t in 2014. Its share of refined copper output increased 7% year-on-year to 300 100 t and will fall to 260 000 t in 2014.

“The 10% decline in mined copper production compared with 2013 is primarily attributable to the 2013 divestments and lower expected tonnes from Kennecott Utah Copper due to a planned smelter maintenance shutdown, partly offset by increased production at Oyu Tolgoi,” the company explained.

Rio Tinto further reported strong coal production increases, while its uranium output plunged, owing to the failure of process plant leach tanks at both its Australian and Namibian operations in December.

Hard coking coal production increased 2% to 8.2-million tonnes, semi-soft coking coal production rose 17% to 3.9-million tonnes and thermal coal production increased by 11% to 23-million tonnes. The group’s guidance for 2014 is 8.5-million tonnes for Australian hard coking coal, 3-million tonnes for semi-soft coking coal and 16.5-million tonnes for thermal coal.

RESHAPING PORTFOLIO

Meanwhile, Walsh reported that Rio was actively reshaping its portfolio by selling noncore businesses.

Divestments totalling some $3.5-billion were announced or completed during 2013, including a binding agreement for the sale of the Claremont thermal coal mine for just over $1-billion, which was due for completion in the first half of 2014.

Across the group, Rio reported a net headcount reduction of 4 000, after taking into account new roles in the iron-ore group to support the Pilbara expansion. A further 3 300 roles left the group through the divested businesses.

A number of capital projects remained on the company’s books, including the development of the Hope Downs 4 mine, in the Pilbara, extending the mine life of the Argyle operation, expanding the port, rail and power facilities in the Pilbara, constructing a desalination facility at Escondida and extending the mine life at the Kennecott Utah copper mine.

Edited by Mariaan Webb
Creamer Media Senior Deputy Editor Online

Comments

Projects

Showroom

Schauenburg SmartMine IoT
Schauenburg SmartMine IoT

SmartMine IoT has been developed with the mining industry in mind, to provides our customers with powerful business intelligence and data modelling...

VISIT SHOWROOM 
Weir Minerals Africa and Middle East
Weir Minerals Africa and Middle East

Weir Minerals Europe, Middle East and Africa is a global supplier of excellent minerals solutions, including pumps, valves, hydrocyclones,...

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Hyphen, Eva mine, ferrochrome price make headlines
Hyphen, Eva mine, ferrochrome price make headlines
27th March 2024
Resources Watch
Resources Watch
27th March 2024

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.114 0.149s - 106pq - 2rq
Subscribe Now