MARKETS

Kestrel helps Rio's coal group fly

RIO Tinto's Kestrel mine played a major part in helping the company's coal and copper division increase its free cash flow during the six months to June 2015 but a longwall change at the Queensland mine over the next half could derail the company's coal ramp up.

Lou Caruana
Kestrel helps Rio's coal group fly

The company has also reported the impact of falling coal prices as putting pressure to keep lowering costs at its Australian operations.

“Thermal and metallurgical coal prices have continued along the declining trend they followed through most of 2014,” it said.

“Global supply continues to expand rather than contract as widespread cost reduction initiatives across the industry have resulted in additional tonnes being placed into the market.

“In both products the influence of Chinese supply has also been key, resulting in reduced net-import levels.”

Rio Tinto, which yesterday reported that its combined coal and copper operations were free cash flow positive during the period and contributed nearly $800 million to the group, was hoping to lift the Kestrel longwall to nameplate capacity of 6 million tonnes after cost blowouts in its installation over the last five years.

Last September Rio Tinto was forced to retrench about 100 workers from Kestrel as it sought to make its investment pay.

“Regrettably, a number of roles at the Kestrel mine need to be reduced, as part of ongoing efforts to ensure the operation is competitive,” a company spokesman said at the time.

The longwall move comes at a difficult for the time at the company which has been progressively ramping up production for the Kestrel South extension.

Rio Tinto’s hard coking coal production for the half year increased by 13% on the previous corresponding period to 4.1 million tonnes while semi-soft coking coal increased by 5% for the half to 1.9Mt.

Pre-tax cash cost improvements in the copper and coal group were $150 million in 2015 first half and have now delivered $1,870 million of cumulative savings compared with the 2012 base.

For coal, Rio Tinto’s share of production is expected to be 18 to 19Mt of thermal coal, 3.0 to 3.4Mt of semi-soft coking coal and 7.1 to 8.1Mt of hard coking coal.

Rio Tinto reduced capital expenditure at its Australian coal operations for the six months to June 2015 to $39 million compared to the $67 million for the previous corresponding period.

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