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Rio Tinto reports record output of minerals and ores

April 30, 2008 on 12:46 pm | In Money |

SYDNEY: Rio Tinto, fighting a takeover approach from a rival mining giant, BHP Billiton, said Wednesday that it produced record levels of iron ore, copper and other industrial minerals in 2007.

Aluminum output rose the most, reflecting Rios acquisition of the Canadian aluminum producer Alcan for $38 billion in November. But, responding to booming demand from China, production records were also set in iron ore, bauxite, alumina, gold and refined copper.

“We are driving the business at record pace, as these numbers clearly show,” the companys chief executive, Tom Albanese, said in a statement accompanying the fourth quarter production report.

BHPs chief executive, Marius Kloppers, has argued that a partnership with Rio would streamline mining operations at a time of high demand for raw materials and would assemble a more efficient supply chain to customers, many of which buy from both companies.

Rio has rejected BHPs three-for-one share swap proposal, worth some $139 billion when it was announced in November.

Analysts said that the robust activity at Rios mines set it on a course to meet profit forecasts of around $7 billion for 2007, though production still appeared restrained by shipping bottlenecks in some locations.

Diversified miners like Rio have faced hurdles with infrastructure, said Grant Craighead, a mining analyst with Stock Resources in Sydney. “The mines are all there and really are running at the capacity of the ports and railways rather than the capacity of the mines,” he said.

Production at Rios Australian coal mines continued to be hindered by rail and port constraints that had led to export quotas being imposed on collieries despite favorable market conditions, Rio said.

While hard coking coal output rose 2 percent in the fourth quarter, production of other coals fell 28 percent.

Fourth quarter refined copper production rose 65 percent, but mined copper fell 14 percent, reflecting a decline in the quality of ore mined from the Kennecott and Northparkes lodes, it said.

Rios 30 percent holding in the Escondida copper mine in Chile, the worlds biggest, delivered a 4 percent rise in mined copper there in the fourth quarter, though refined metal from the mine dropped 7 percent, the companys figures showed.

Fourth quarter iron ore output increased 11 percent over the same period the previous year, driving up full year production to 179 million tons, it said.

Rio Tintos profit from its iron ore division may have topped $3 billion in 2007, maintaining its ranking as the companys second-largest income generator after copper, according to analysts forecasts.

Analysts predict that the prices that mining companies charge steel mills for iron ore will rise by 50 percent or more in the next shipping year starting April 1, 2008 as Rio moves to lift its annual output of ore to 220 million tons.

Fourth quarter aluminum production soared 287 percent, swollen by the inclusion of 618,000 tons produced by Alcan.

BHP, which will report its quarterly production figures on Jan. 23, has until Feb. 6 to make a formal offer for Rio, or walk away under a deadline imposed by Britains Takeover Panel, which oversees mergers and acquisitions.

Shares of Rio Tinto closed 2.95 percent lower on Wednesday, on a day when the broader market fell by 2.5 percent.