The Rio Tinto Limited (ASX: RIO) share price will be one to watch this morning after the release of its second quarter production update.
How did Rio Tinto perform?
During the second quarter Rio Tinto reported 86.7Mt of Pilbara iron ore shipments, which brought its first half shipments to a total of 159.6Mt. This was a 1% and 3% increase, respectively, on the prior corresponding periods.
Pleasingly, the mining giant achieved higher production in the second quarter despite the impact of COVID-19 related operational controls.
Another positive was the price Rio Tinto commanded for its iron ore. It revealed a Pilbara iron ore FOB average realised price of US$86.5 per dmt in the second quarter and US$85.4 per dmt for the half.
Also performing well were its Bauxite and Iron Ore pellets operations. Bauxite production came in 9% higher for the quarter at 14.6Mt (+8% for the half) and iron ore pellets production was up 9% for the quarter to 2.8Mt (+6% for the half).
This offset weaker Aluminium, Copper, and Titanium dioxide production during the quarter and half. For the first half, aluminium production was down 2%, copper production fell 5%, and titanium dioxide production reduced by 7%.
Iron ore guidance on track.
Rio Tinto’s Chief Executive, J-S Jacques, was pleased with the company’s performance and notes that it is on track to achieve its iron ore guidance in FY 2020.
He said “We delivered a strong performance, particularly in iron ore and bauxite, demonstrating the underlying resilience of our business and ability to adapt in difficult conditions. Our iron ore assets are performing well in a strong pricing environment and we are on track to meet our 2020 iron ore guidance.”
The chief executive also spoke about the pandemic and the heavily criticised events at Juukan Gorge during the quarter.
“Our focus is to maintain a business as usual approach with many safeguards at a very unusual time. Our operational teams are continuing to run our assets safely so we can continue to contribute to local and national economies and serve our customers. We remain even more committed to our relationship with communities, following the Juukan Gorge events in the Pilbara, and we are engaging extensively with Traditional Owners around our operations and across Australia,” Mr Jacques added.
He concluded: “We are executing our value over volume strategy to drive performance, productivity and free cash flow per share. We will remain agile and ready to adapt to the changing operating and macro environment.”
Rio Tinto’s capital expenditure is expected to be around US$6 billion in FY 2020, compared to previous guidance of US$5 billion to US$6 billion. This is due to an appreciation in its major operating currencies against the US dollar since the first quarter and a reduced impact of COVID-19 on both sustaining and development expenditure.
After which, capital expenditure for FY 2021 and FY 2022 is expected to be around US$7 billion per year, up from US$6.5 billion. This guidance includes spend from 2020 that has been re-phased as a result of COVID-19 restrictions.
Elsewhere, Rio Tinto’s production guidance remains unchanged across all commodities and it continues to target iron ore shipments of 324Mt to 334Mt this year.
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