Rio Tinto warns on the global economy


Rio Tinto (ASX: RIO) had mixed news for investors when it released its second-quarter production statement.

On the plus side, iron ore, which accounts for over three-quarters of its profits, saw record first-half production. But the comments of Rio Tinto chief executive Tom Albanese on the global economy were less inspiring:

Global economic conditions and sentiment dropped markedly in the second quarter. We are keeping a close eye on the pace of the US recovery, the continuing eurozone crisis and the impact of efforts to stimulate the Chinese economy on the markets that we serve.

Despite the uncertainty, Rio Tinto is continuing to press ahead with its huge expansion plans for iron ore. Rio is spending $2 billion to expand capacity from its Pilbara operations from their current level of 230 million tonnes per annum, to 283 million tonnes by the end of 2013, and 353 million tonnes by the end of 2015. Further expenditure of $1.7 billion is being made to extend the life of another Australian operation to 2021, and $0.5 billion for a project in Guinea due to come online in 2015.

Meanwhile, Rio’s production guidance for iron ore for the whole of 2012 remained unchanged at 250 million tonnes on a 100% ownership basis, although some analysts have expressed concerns whether there will be enough demand from China to meet this supply.

Copper, Rio Tinto’s second most significant product line, saw an 8% drop in production from the first half of last year, as its Utah open pit operation progressed through lower grade areas of its resource.

Rio Tinto’s shares slipped 1% on the back of this release, but remain well below the recent peak set earlier this year.

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A version of this article, written by Stuart Watson, originally appeared on fool.co.uk

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