COVID-19 constraints to save Rio Tinto $1B

RIO Tinto will save about $1 billion in capital costs due to COVID-19 constraints and the strong US dollar as iron ore demand remains strong despite the pandemic’s impacts thanks to seaborne supply disruptions and hungry Chinese steel mills.
COVID-19 constraints to save Rio Tinto $1B COVID-19 constraints to save Rio Tinto $1B COVID-19 constraints to save Rio Tinto $1B COVID-19 constraints to save Rio Tinto $1B COVID-19 constraints to save Rio Tinto $1B

Rio Tinto is rolling through the COVID-19 crisis

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Rio Tinto chief executive Jean-Sebastien Jacques said the company was still delivering despite the uncertain and unprecedented times as the company focused on maintaining a business as usual approach.

It operations in Western Australia have continued, with the company reporting overall construction on its projects to be progressing well.

Retaining key people in the state ahead of implementation of the hard border closure to limit the transmission of COVID-19, has helped.

The ramp-up of Koodaideri is still on schedule for early 2022.

Other projects at Western Turner Syncline Phase 2 and Robe River Joint Venture sustaining projects including West Angelas and Mesas B, C and H at Robe Valley are also on track.

The company has changed its rosters to limit crew changeovers on sites and at the operations centre to reduce the risk of transmission.

Production was strong across Rio Tinto's iron ore business in the first quarter of 2020 with 77.8 million tonnes of ore mined.

While production of Pilbara Blend and SP10 Lump ore was down 7% (18.5Mt) and Pilbara Blend and SP10 Fines down 4% (27.7Mt) compared to the previous year, this was offset by a 132% and 95% increase in Robe Valley Lump and Fines production, with 1.5Mt and 2.4Mt dug up, respectively.

Production of Yandicoogina Fines was 14.1Mt, up 5% on the previous year.

Total iron ore shipments were up 5% on the previous year, at 72.9Mt, which Rio Tinto attributed to the strong recovery across the network in March after Tropical Cyclone Damien swept through the area in February.

The storm left infrastructure damage and interrupted operations due to flooding in its wake.

Operating cost guidance of $14-$15 per tonne is unchanged.

The ramp-up of operations at the $2.6 billion Amrun bauxite mine on Cape York saw production up 8% compared to the first quarter of 2019 at 13.8Mt, with third party shipments of 9.5Mt 7% higher than the previous year.

At the soon-to-close Argyle diamond mine in Western Australia's far north carat production was 23% lower than last quarter, although full year guidance is unaffected., due to a demand drop brought on by the global retail shutdown.

At the Ranger uranium project in central Australia where Rio Tinto holds an 86% interest in owner Energy Resources of Australia, production from stockpiles was 5% higher than the previous quarter.

Jacques said all assets continue to operate and performed robustly in the first quarter.

He said capital expenditure guidance has been downgraded from $7 billion to $5-6 billion due to Covid-19 constraints and the strong US dollar.

"Our world-class portfolio and strong balance sheet serve us well in all market conditions and are particularly valuable in the current volatile environment," he said.

"Our resilience and value over volume strategy mean we can continue to invest in our business and support our communities and host governments."

Jacques said Rio Tinto's customer order books remain healthy.