BUSINESS

IOC helps Rio Tinto to post record first-quarter iron ore production

04/16/2013 11:57 EDT | Updated 06/16/2013 05:12 EDT
MONTREAL - Rio Tinto's iron ore production hit a record in the first quarter as a result of increased contributions from the Iron Ore Company of Canada and from its Pilbara operations in Australia.

The London-based miner also said Tuesday that aluminum production grew six per cent from last year. The change largely reflected resolutions to a lockout at the smelter in Alma, Que. and a power outage at Shawinigan, Que.

"Our operations achieved a solid performance in the first quarter, recovering rapidly from the seasonal weather disruptions," new CEO Sam Walsh said in a news release.

However, it said a pit wall slide last week at its Kennecott Utah copper mine will have a significant impact on production this year. Production has been suspended and will likely be 100,000 tonnes less this year than previously anticipated.

Walsh said Rio's two major growth projects in Pilbara and in Mongolia are on track for production this year and are poised to deliver "attractive returns" for shareholders.

He added that the company is also making progress in achieving cost reduction targets.

Rio Tinto (NYSE:RIO) said global iron ore production was 61.2 million tonnes in the quarter or 48 million tonnes attributable to Rio Tinto. That's up six per cent from a year ago.

Production at the Iron Ore Company of Canada increased 20 per cent to 3.4 million tonnes following the completion of a concentrate expansion project. Rio's share as owner of 58.7 per cent of the facility was two million tonnes.

Jackie Przybylowski of Desjardins Capital Markets said IOC's output was in line with her expectations of 3.5 million tonnes.

Production and sales are typically weak in the first quarter due to seasonal factors such as severe weather.

The analyst expects output will increase to 5.1 million tonnes in the second quarter and 5.5 million tonnes thereafter, reaching an annual rate of 23 million tonnes following the second expansion phase.

Pilbara produced 30 million tonnes of iron ore, compared with 28.6 million tonnes a year earlier.

Rio maintained its guidance to produce 265 million tonnes of ore from its operations in Australia and Canada this year.

Production at core aluminum smelters, including those in Canada, increased 14 per cent from last year, while production at Pacific smelters up for sale decreased six per cent.

Rio's share of diamonds processed at the Diavik mine in the Northwest Territories that is co-owned with Dominion Diamond Corp. (TSX:DDC), formerly Harry Winston, increased 21 per cent to 1.2 million carats in the first quarter.

Output increased despite a five per cent reduction in ore processed, due to higher grades from the underground mine.

Total production of 1.9 million carats was higher than expected, raising the possibility that the outlook for 2013 production could be increased in the second quarter, added John Hughes of Desjardins.

Dominion has said previously that it expected six million carats would be produced in 2013.