The Rio Tinto Limited (ASX: RIO) share price will be on watch this morning following the release of its first quarter update.
How did Rio Tinto perform in the first quarter?
Rio Tinto had a solid first quarter of production and remains on course to meet the majority of its guidance for FY 2020.
The highlight during the first quarter was its key Pilbara iron ore. Production increased 2% on the prior corresponding period to 77.8Mt and shipments grew 5% to 72.9Mt.
This solid performance has allowed management to reiterate its full year Pilbara iron ore shipments guidance of 324Mt to 334Mt in FY 2020.
Pleasingly, management revealed that demand for its high quality iron ore remains strong despite the coronavirus pandemic.
It advised: “Demand for the high-quality iron ores we produce remained strong in the first quarter of 2020, mainly driven by a combination of seaborne supply disruptions and solid demand from China’s steel mills despite Covid-19 impacts.”
Elsewhere, Bauxite production was up 8% to 13.8Mt during the quarter. Whereas Aluminium production fell 2%, Mined Copper dropped 9%, and Titanium Dioxide Slag fell 1%.
Lower capital expenditures.
Rio Tinto has lowered its capital expenditure guidance for FY 2020. It is now expected to be between $5 billion and $6 billion, compared to previous guidance of $7 billion.
This is partly due to COVID-19 constraints and favourable currency impacts from the strong US dollar.
Though, some capital expenditure originally planned for 2020 may subsequently flow into 2021 and 2022.
As I mentioned above, the majority of its guidance has been reaffirmed for FY 2020. This includes its cost guidance for iron ore and copper.
Though, one notable downgrade is its copper production. Mined Copper is expected to be 475 to 520kt, down from 530 to 570kt. And Refined Copper is now expected in the range of 165 to 205kt, compared to 205 to 235kt. This reflects anticipated lower copper grades, partially offset by higher throughput.
Rio Tinto’s chief executive, J-S Jacques, was pleased with the company’s performance during the quarter.
He said “In these uncertain and unprecedented times we continue to deliver products to our customers with our first priority to protect the health and safety of all our employees and communities. We are focused on maintaining a business as usual approach and have taken extensive measures to ensure we can do so safely.”
“All of our assets continue to operate and we achieved a very robust production performance in the first quarter. Our world-class portfolio and strong balance sheet serve us well in all market conditions and are particularly valuable in the current volatile environment. Our resilience and value over volume strategy mean we can continue to invest in our business, and support our communities and host governments,” he concluded.