Kestrel ramp up fails to fire Rio coking coal guidance

LOWER than expected production during the ramp up at Rio Tinto Coal’s $2 billion Kestrel longwall mine extension has seen the company lower its 2014 coking coal production guidance to 7.4 million tonnes.
Kestrel ramp up fails to fire Rio coking coal guidance Kestrel ramp up fails to fire Rio coking coal guidance Kestrel ramp up fails to fire Rio coking coal guidance Kestrel ramp up fails to fire Rio coking coal guidance Kestrel ramp up fails to fire Rio coking coal guidance

Kestrel South's pink shearer. Image courtesy of Rio Tinto.

Lou Caruana

Rio Tinto – which previously had flagged that it would produce 8.2Mt of coking coal this year – said the drop was also partly attributable to a change in its production profile to produce additional higher-margin thermal coal from a processing plant by-product stream at its Hail Creek mine.

Rio Tinto’s coal business has come under close scrutiny by group CEO Sam Walsh and his executive team as they seek to take out costs out of operations and maximise production and profit opportunities.

“With a relentless focus on achieving sustainable cost savings while delivering the highest quality growth, we continue to transform Rio Tinto into a stronger, more disciplined business that will consistently deliver strong cash flows and shareholder value,” Walsh said.

Overall, hard coking coal production in Australia for the first half of 2014 was 10% higher than the first half of 2013 at 3.6Mt.

This was largely driven by increased coal production at the Kestrel mine, where the coal handling preparation plant had been shut for upgrade works in the first half of 2013 as part of the extension project completed later that year.

Rio Tinto is now increasing its expected share of thermal coal production to 17.5Mt from 16.7Mt previously.

Australian half yearly thermal coal production increased by 6% compared with the first half of 2013 due to productivity gains in the Hunter Valley and additional production from a processing plant by-product stream at Hail Creek.

This was partially offset by the absence of production from Clermont following completion of the divestment of Rio Tinto’s 50.1% interest in the mine in the second quarter 2014.

Semi-soft coking coal production for the half at 1.8Mt was 16% lower than the first half of 2013 and the June quarterly production figure of 903,000t was 21% lower than the second quarter of 2013, reflecting changes in the production mix to maximise higher margin thermal coal.

First-half production in Mozambique was affected by rail and port constraints, as well as stoppages and operational changes in the first quarter. Second quarter production was stronger than the same period of last year due to productivity and yield improvements.

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