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Rio Tinto: Strong operational performances at Kestrel

Key points from Rio Tinto Q4 Production Results

 

    • Pilbara iron ore shipments of 90.0 million tonnes in the fourth quarter were three per cent higher than the fourth quarter of 2016. Total shipments for 2017 of 330.1 million tonnes were in line with guidance.

 

    • Bauxite production of 50.8 million tonnes was six per cent higher than 2016 and in line with upwardly revised full year guidance. Third party shipments increased by ten per cent to 32.3 million tonnes.

 

    • Aluminium production of 3.6 million tonnes was in line with guidance with generally strong performance slightly offset by lower production at Boyne and Sohar.

 

    • Mined copper production of 478.1 thousand tonnes was nine per cent lower than 2016 due primarily to the impact of a 43 day strike at Escondida in the first quarter. Production was in line with revised guidance.

 

    • Titanium dioxide slag production of 1.3 million tonnes was 25 per cent higher than 2016, reflecting increased market demand, with strengthening pigment prices supported by low inventory and tight supply.

 

    • Production and shipment guidance for 2018 remains unchanged from the estimates provided at the investor seminar held on 4 December 2017.

 

    • The major growth projects remain on track. The Silvergrass iron ore mine was commissioned in the fourth quarter of 2017 and will continue to ramp up in 2018. Amrun is on schedule for first bauxite shipment in the first half of 2019 and construction of the first drawbell at Oyu Tolgoi Underground is expected in mid-2020.

 

    • In November, Rio Tinto successfully completed an A$750 million off-market buy-back in Rio Tinto Limited shares and in December completed a $1.5 billion on-market buy-back of Rio Tinto plc shares. An additional $1.925 billion on-market buy-back in Rio Tinto plc shares commenced on 27 December 2017 and is to be completed no later than 31 December 2018.

 

  • On 10 January 2018, Rio Tinto announced it had received a binding offer for the sale of the Aluminium Dunkerque smelter in France for $500 million, subject to final adjustments. The sale is expected to complete in the second quarter of 2018, subject to satisfactory completion of consultations with key stakeholders.

Coal

Hard coking coal production in 2017 was five per cent lower than 2016 due to the impact of Cyclone Debbie in the first quarter of 2017. Fourth quarter production was six per cent higher than the
corresponding quarter of 2016 reflecting strong operational performances at Kestrel and Hail Creek.

As announced on 1 September 2017, Rio Tinto completed the sale of Coal & Allied to Yancoal Australia for total consideration of $2.69 billion, which included Coal & Allied’s interests in the Hunter Valley Operations, Mount Thorley and Warkworth mines. The sale, coupled with mine production sequencing changes at Hunter Valley Operations and Mount Thorley Warkworth, resulted in semi-soft coking coal and thermal coal production being lower than 2016 by 51 per cent and 17 per cent respectively.

Hard coking coal prices achieved in the second half of 2017 averaged $164 per tonne on an FOB basis compared to $177 per tonne in the first half of 2017. Average prices realised for thermal coal were $78 per tonne on an FOB basis in both the first half and second half of 2017.

 

Kestrel is an underground coal mine located in the Bowen Basin, Queensland, Australia. It is operated by Rio Tinto Limited. Anglo Pacific Group plc (LON:APF) owns 50% of certain sub-stratum lands which, under Queensland law, entitle it to coal royalty receipts from the Kestrel mine. The royalty rate to which the Group is presently entitled is prescribed by the Queensland Mineral Resources Regulations. These regulations currently stipulate that the basis of calculation is a three-tiered fixed percentage of the invoiced value of the coal as follows: 7% of value up to and including A$100; 12.5% of the value over A$100 and up to and including A$150; and 15% thereafter.

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Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.