Sydney: Rio Tinto on Wednesday reported a 2% fall in second-quarter iron ore production from a year ago and raised concern of a possible double-dip recession in OECD countries and a slight slowdown in Chinese growth.
The diversified miner, the world’s no.2 producer of the steel making raw material, also said it was running its iron ore mines close to capacity and forecast total 2010 production of 234 million tonnes.
“2010 continues to shape up well for Rio Tinto and we are driving our operations at close to capacity,” chief executive Tom Albanese said in the company’s second-quarter production summary.
“Markets for most of our products are strong and the overall long-term demand outlook is positive. But in recent weeks, fears about a possible double-dip recession in OECD countries and a slight slowdown in Chinese growth have led to some weakening in sentiment,” Albanese said.
Spot iron ore prices IO62-dropped 10% in the second quarter, copper was down 18 percent and aluminium was off 15%.
Rio Tinto said mined copper production dropped 19% versus the second quarter of 2009 primarily due to lower ore gradings at its Kennecott Utah Copper mine and Indonesia’s Grasberg mine.
It also warned that low snow and rain levels in the Saguenay region of Quebec in the first half were likely to lead to reduced power generation and a need to purchase power or curtail aluminium production.
“There’s no major surprises in there,” said Michael Bentley, portfolio manager at Northward Capital, which owns Rio Tinto shares.
“In aluminium, I suppose it’s a bit of a concern they’ve got these issues with the power in Canada. But that’s a temporary issue.”
The impact of this on earnings before interest, tax depreciation and amortisation (EBITDA) in the second half of 2010 was expected to be about $100 million, the company said.
At its 30%-owned Escondida mine in Chile, second-quarter mined copper was 6 percent up from a year ago, thanks to richer ores and an increase in copper in ore stacked for leaching.
Escondida’s refined copper production declined by 10%, in part due to maintenance work, according to Rio Tinto.
Rio Tinto shares traded 0.8% higher at A$67.11 at 0559 GMT, underperforming the broader market’s 1.6% gain.