MARKETS

Kestrel hopes glimmer amid Rio's half-yearly loss

RIO Tinto's energy group has seen its half-yearly earnings plunge from $US320 million last year to a loss of $53 million this year due to lower coal prices and the absence of gains on the divestment of its exploration properties.

Lou Caruana
Kestrel hopes glimmer amid Rio's half-yearly loss

But the company is pinning its hopes on increasing coal production from its Kestrel Mine Extension in Queensland.

In July, coal production started from the Kestrel Mine Extension project and is expected to ramp up during a gradual transition of production as the existing mine winds down.

Kestrel South is expected to reach full capacity by the end of 2014 and produce an average of 5.7 million tonnes per annum over the next 20 years.

The company has savagely cut back its capital expenditure program and is reducing the number of contractors at its operations to return to profitability.

It spent $510 million on capital works in the six months to June, compared to $964 million for the previous corresponding period.

The shortfall was only partly offset by increased productivity and higher volumes, coupled with cash cost reduction initiatives that drove down unit costs, the company said.

“Cost improvements gained momentum through the first half of 2013 and boosted earnings by more

than $200 million compared with 2012 first half,” it said.

“There are more than 500 separate cost-savings

Initiatives underway across the energy group, including a targeted reduction in the number of contractor companies engaged, in order to drive a 20% reduction in contractor spend levels.”

Hard coking coal production in Australia was 11% lower than 2012 first half at 3.5 million tonnes.

The company attributed this to the planned shutdown of the Kestrel mine coal-handling preparation plant

for upgrade works as part of the Kestrel Mine Extension project, which was completed in April.

A low wall failure at the Hail Creek Mine in Queensland in July resulted in a decrease to full-year coking coal production guidance.

Semi-soft production was 36% higher than the same period of 2012 to 2.1 million.

Operations in the Hunter Valley changed their production profile to take advantage of the stronger short-term market for alternative product to hard coking coal due to wet weather in Queensland.

Australian thermal coal production increased by 21% compared with 2012 first half to 11Mt.

This was driven by a 72% half-on-half rise in production at Clermont as well as increased

production at sites in the Hunter Valley following brownfield expansions and ongoing work to

improve the efficiency and productivity of operations, including performance of the load and haul

fleets.

In 2013, Rio Tinto’s share of Australian hard coking, semi soft coking and thermal coal production is expected to be 8Mt, 4Mt and 21Mt, respectively.

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