Rio Tinto Limited (ASX: RIO) released its fourth quarter (Q4) production report on Tuesday morning, outlining another year of record production and shipments.
In a statement to the ASX, Rio Tinto's chief executive Sam Walsh said: "We have had a successful year of production, capped off with a robust fourth quarter. Output is in line with our targets across all of our major products. In a challenging market Rio Tinto remains focused on operating and commercial excellence to leverage our low-cost position and maximise value for shareholders."
Despite the record result however, the report left the market somewhat under-enthused with investors selling the shares down by more than 1.1% early in the session.
Iron Ore
In the fourth quarter, Rio Tinto shipped 82.2 million tonnes (Mt) of iron ore globally, an increase of 13% compared to the prior corresponding quarter, taking its total shipments for 2014 to 302.6Mt, up 17% on 2013. Meanwhile, the miner produced 79.1Mt for the quarter, an increase of 12% on Q413, while it reported an 11% increase for the year with total production hitting 295.4Mt.
While Rio Tinto managed to beat its own sales guidance of 300Mt, its quarterly effort fell short of UBS forecasts of 83.9Mt, according to The Australian. Its quarterly production of 79.1Mt also fell short of expectations set by UBS and Deutsche Bank by roughly 1Mt.
The miner said it expects to dig up 330 million tonnes of the commodity in 2015 while its 360 million tonnes per annum infrastructure is around 80% complete.
Copper
The miner also fell short in its copper division with mined copper plummeting 23% in the quarter compared to the same quarter in 2013. While total production for the year rose 4% to 603,100 tonnes (falling short of guidance of 615,000 tonnes), it mined just 128,300 tonnes in the final quarter as a result of water restrictions hitting its Escondida mine in Chile – a joint venture Rio Tinto owns with BHP Billiton Limited (ASX: BHP).
As was the case with iron ore, copper production fell short of expectations set be UBS and Deutsche Bank which, according to The Australian, had forecast 138,900 tonnes and 147,600 tonnes respectively.
Should you buy?
Rio Tinto is one of the world's lowest cost operators, making it one of the safest bets in the iron ore sector. Indeed, some analysts estimate its breakeven cost for iron ore is around US$43 a tonne, which compares favourably to the commodity's current US$68.09 price tag.
While the miner can still make a healthy profit even at today's depressed prices, an investment in Rio Tinto today could prove unwise. Although the commodity has shown signs of stability recently, many analysts believe iron ore could continue to deteriorate in price over the course of the year, which would likely act as a drag on Rio Tinto's shares. Investors would be wise to add the stock to their watchlist and wait for the volatility facing the sector to subside before buying.
