Coking coal demand brighter for Rio

RIO Tinto’s Australian hard coking coal production for the June quarter fell 7% year-on-year due to wet weather, but was boosted by 38% compared to the last quarter as demand started to claw back.
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The Kestrel longwall.

Angie Tomlinson

Australian thermal coal production was up 3% year-on-year and up 8% on the March quarter as Blair Athol chipped in with an impressive June quarter.

Rio said 2009 production at its Kestrel longwall mine in the Bowen Basin was forecast to be in line with last year’s output, albeit with a higher proportion of thermal coal this year.

The mine produced 758,000 tonnes of coking coal during the second quarter and 151,000t of thermal coal. The operation has produced 1.89Mt for the first half of the year.

US thermal coal production and shipments slipped 5% year-on-year as the economic downturn affected domestic thermal coal demand, with customers switching to lower-cost natural gas.

Pre-tax and pre-divestment exploration and evaluation expenditure for the six months to June 30, 2009, was $US242 million ($A303.9 million), down from $401 million in the corresponding period last year.

The reduction is part of Rio’s strategy to reduce operating costs by $2.5 billion this year.

“We continue to press ahead with actions to reduce costs across the board, align production with demand, and bring down levels of net debt,” Rio chief executive Tom Albanese said.

“We have successfully completed our $15.2 billion rights issue this month and during the course of this year we have agreed divestments to the value of $3.7 billion."

Rio’s advanced coal projects include Altai Nuurs in Mongolia and Crowsnest in Canada. The company’s greenfield projects are in Canada, South Africa, Tanzania and Mongolia.

Rio was trading up 5% mid-morning today at $A52.61.