Here's what Rio Tinto (ASX:RIO) boss says is 'causing some challenges' right now

The Omicron variant is spreading in Western Australia.

| More on:
Female worker sitting desk with head in hand and looking fed up

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Rio Tinto gaining on strong iron ore prices
  • COVID and border closure impacting WA labour market
  • Production could be impacted

Rio Tinto Limited (ASX: RIO) shares have been benefiting from a resurgent iron ore price.

The industrial metal is currently trading at US$152 per tonne, having dropped to lows of some US$87 per tonne in mid-November.

The surging price have helped propel Rio Tinto shares to a 19% gain this calendar year, even as the S&P/ASX 200 Index (ASX: XJO) has slipped 4%.

Of course to mine that iron ore you need skilled people in the field. And that, says Rio Tinto Iron Ore CEO Simon Trott, is "causing some challenges".

What's all this about a labour shortage?

Unemployment levels are falling across Australia.

But after 2 years of border closures to the rest of the nation and with COVID-19 now leaking into the state, the big miners like Rio Tinto are facing a particularly tight labour market in Western Australia.

And with 37 new local cases reported yesterday, by far the most in WA since the pandemic spread down under, those labour challenges aren't likely to go away anytime soon.

In an effort to keep its own work force safe and free from week-long periods of isolation, Rio Tinto tests its workers before they fly out to the mine sites.

According to Trott (quoted by ABC News):

We have to be ready. We're going to have to respond to the circumstances that we face each time, and we can't stand here and predict exactly what will happen in the future. Certainly, we're seeing greater cases in the community.

Rio Tinto tests some 12,000 of its workers at Perth Airport each week. Last month 2 of those workers tested positive before flying to the Pilbara.

While those workers were screened out before arriving on the mine site, Trott doesn't expect this to last indefinitely:

A really big part is about making sure that we plan for having cases on site. As we've seen in other states in Australia, and across the world, we can't imagine that we will be immune from it.

As ABC News reported, Rio Tinto is expanding its rapid antigen tests beyond just those working at the mine sites.

"We have, in the last week, stood-up screening for employees at our Perth office as well, where employees will be tested on their first day at work each week," Trott said.

As for the labour crunch hitting miners in WA?

According to Trott:

Clearly that does have an impact in terms of our day-to-day operations and the activities that we do, and we need to work our way through that. It is certainly causing some challenges at the moment.

How could this impact Rio Tinto shares?

Higher labour costs and project disruptions could see some investors hitting the sell button when the quarterly activity reports come out.

Bell Potter Securities' Giuliano Sala Tenna said:

Labour costs will rise and they won't be able to get jobs done. There will be lots of dislocations within the projects, so we're concerned that we're going to see some weak quarterlies, which could see some knee-jerk reactions to some of the share prices [for] those miners.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Coronavirus News

Man with his hand on his face looking at a falling share price chart on a tablet.
Share Market News

ASX 200 stocks dive 2.4% in worst trading day since Ukraine crisis hit

It's not a good start to the week for the market.

Read more »

A woman looks nervous and uncertain holding a hand to her chin while looking at a paper cut out of a plane that she's holding in her other hand. representing the falling Air New Zealand share price today
Travel Shares

Borders just reopened so why is the Flight Centre (ASX:FLT) share price falling today?

Experts believe it may take several years for tourism levels to rebound to pre-pandemic numbers.

Read more »

A worker in hi vis gear holds his hand up saying no.
Coronavirus News

Own BHP (ASX:BHP) shares? Here's how the ASX 200 miner is battling COVID

Mining unions have not generally supported mandatory vaccinations.

Read more »

A man wearing a mask punches the air with joy after getting a negative COVID result on a rapid antigen test.
Coronavirus News

Why are ASX COVID test shares climbing today?

COVID-19 tests are in focus again today.

Read more »

a girl stands in an apple orchard holding two red apples in raised arms with a happy, celebratory look on her face with a large smile and a pretty country background to the picture.

CBA reveals the Australian economy's leading state amid COVID surge

The states and territories have all been impacted by the pandemic.

Read more »

Rapid Antigen Test taking place.
Share Market News

Why is Ellume hitting headlines today?

Brisbane-based diagnostics developer Ellume is back in the headlines.

Read more »

A woman looks quizzical as she looks at a graph of the share market.
Share Market News

Inghams (ASX:ING) share price sinks as Omicron bites

Inghams shares are down as COVID hurts its operations.

Read more »

A female scientist sits at a microscope in a Universal Biosensors laboratory smiling while her colleague checks beakers of COVID-19 samples in the background.
Healthcare Shares

Universal Biosensors (ASX:UBI) share price up on "global first" 30-second COVID-19 test

This micro-cap biotech has big news for ASX investors today.

Read more »