Rio Tinto earnings face hit after mine slide
The wall slide struck Rio's Bingham Canyon mine in Utah on April 10, and while no employees were hurt, Rio said on Tuesday the impact on copper mining and refining would be "significant".
In numerical terms the amount of copper refined in 2013 will fall by more than a third, from 305,000 tonnes to 200,000. Rio's copper division was expected to deliver close to $US2.3 billion of earnings before interest and tax in 2013, and RBC analyst Chris Drew said the lost production would equate to a 2.5 per cent hit to earnings before interest and tax.
Mr Drew said there were likely to be further costs associated with remediation and repairs.
Reports have previously suggested some equipment and trucks were damaged in the slide.
The amount of copper mined is tipped to fall by 125,000 tonnes to 540,000. Copper ranks as Rio's second most lucrative commodity behind iron ore, which was responsible for most of the company's earnings in 2012.
Rio produced about 48.2 million tonnes of iron ore from its operations in Canada and Western Australia during the three months to March 31, about 7 per cent lower than the December quarter.
Reduced production volumes had been expected given that multiple cyclones blew through WA's Pilbara region during the quarter.
Rio's plan to expand its Pilbara iron ore business to have an export capacity of 360 million tonnes of iron ore per year by early 2015 remains on track.
Exports of thermal coal and coking coal from Australia slipped lower than the December quarter, and were partially affected by wet weather and flooding in the nation's north-east.
The wall slide at Bingham Canyon was the last thing Rio needed in what is already shaping as a difficult year for it. Rio has already announced close to $US14 billion of impairments and changed its chief executive this year and was recently forced to scale back its most important growth project - Oyu Tolgoi - after ongoing difficulties with the Mongolian government.
Rio shares have fallen almost 20 per cent since January 1 and the company is reportedly seeking to sell numerous assets including Australian coal mines, Australian copper and gold mines, aluminium assets and possibly its iron ore business in Canada.
Shares in Rio closed 11¢ lower at $54.98.
Frequently Asked Questions about this Article…
The wall slide at Rio Tinto's Bingham Canyon copper mine in Utah caused a significant loss of production in 2013. The article says Rio's overall earnings were expected to take a hit of close to 3% for 2013, and RBC analyst Chris Drew estimated the lost copper production would equate to about a 2.5% hit to earnings before interest and tax (EBIT).
According to the article, refined copper volumes for 2013 were expected to fall from 305,000 tonnes to 200,000 tonnes (a drop of more than one third). The amount of copper mined was tipped to fall by 125,000 tonnes to 540,000 tonnes.
Yes. The article notes analysts expected further costs related to remediation and repairs, and reports suggested some equipment and trucks were damaged in the slide — which could add to Rio Tinto’s costs beyond the production shortfall.
The slide hit Rio's copper operations, which are the company’s second most lucrative commodity after iron ore. Iron ore remained the biggest contributor to Rio’s earnings in 2012, so the copper setback affects a secondary but still important part of the company’s revenue mix.
Rio produced about 48.2 million tonnes of iron ore in the quarter to March 31, roughly 7% lower than the December quarter — partly due to cyclones in WA’s Pilbara. Exports of thermal and coking coal from Australia also slipped compared with the December quarter, affected in part by wet weather and flooding in the nation’s north-east.
Yes. The article states Rio’s plan to expand its Pilbara iron ore business to an export capacity of 360 million tonnes per year by early 2015 remained on track at the time of reporting.
The article reports Rio Tinto shares had fallen almost 20% since January 1 amid a tough year that included about US$14 billion of impairments, a change of chief executive, and a scaled-back Oyu Tolgoi project. At the close reported in the article, shares were down 11 cents at $54.98.
Yes. The article said Rio was reportedly seeking to sell numerous assets, including Australian coal mines, Australian copper and gold mines, aluminium assets, and possibly its iron ore business in Canada, as part of responses to the company’s challenging year.
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