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10 things you need to know about Rio Tinto Limited’s 1Q production report

This morning, Rio Tinto Limited (ASX: RIO) released its production report for the first quarter of 2014. Here are 10 things to know about today’s announcement:

  1. Versus 1Q 2013, iron ore production was up 8%
  2. Versus 4Q 2013, iron ore production dropped 6% as a result of tropical cyclone Christine
  3. In 2014 Rio expects to produce 295 million tonnes of iron ore (2013: 266mt)
  4. In 2015 Rio expects to produce 330 million tonnes of iron ore
  5. Copper was the standout performer – increasing production 17% compared to 1Q 2013 although dropping 6% quarter-on-quarter as a result of lower grades at the Escondida project in Chile
  6. Rio’s new Oyu Tolgoi project suffered “post-commissioning issues” but is now operating at full capacity
  7. Exploration and evaluation expenditure was significantly lower year-on-year
  8. Bauxite production was up 5% compared to 1Q 2013
  9. Aluminium production was flat versus 1Q 2013 and slightly lower than 4Q 2013 following the curtailment of production at a number of smelters.
  10. Hard coking, semi-soft and thermal coal production increased between 12% and 14% versus 1Q 2013.

Analysis

Since iron ore accounted for over 90% of Rio’s earnings in 2013, it was pleasing to see the miner still expects the nameplate production rate of 290Mtpa from its Pilbara mines to be achieved before mid-2014 despite the impact of a tropical cyclone. With forecast production of 295 million tonnes (including Iron ore of Canada), Rio’s iron ore division will easily be the number one earnings generator for the company.

For long-term sustainability, it was also encouraging to know Rio’s year-on-year copper production increased. Although production at Escondida – the world’s biggest copper mine (jointly owned by Rio, BHP Billiton Limited (ASX: BHP) and a number of Japanese investors) – dropped 6% quarter-on-quarter, it was the result of lower grades and partially offset by greater mill throughput.

Foolish takeaway

For investors bullish on Chinese growth and willing to risk their money on an iron ore miner, Rio seems to have turned a corner and is starting to do everything right by investors. Now might be the time to add it to your watchlist.

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