Rio Tinto (RIO) is capitalising on the surging iron ore price, hitting a record production rate in June. But the focus remains the company’s destruction of the Juukan Gorge caves. Chief executive Jean-Sebastien Jacques, who left it to iron ore boss Chris Salisbury to front the apology tour, said the company “remained even more committed to our relationship with communities”.
Rio is doing an internal review on the destruction of the sacred sites, which occurred during the expansion of one of its Pilbara mines, and will contribute to a federal government inquiry.
Production-wise, it was a positive first-half and June quarter. Iron ore production and importantly shipped volume were both up 3 per cent in the half, to 161.1m tonnes (t) and 159.6mt respectively. While production had slowed in the March quarter due to a cyclone and Covid-19, a sharp recovery in the three months to 30 June brought it back on track. Iron ore is now trading at over $100 (£80) per tonne (t).
Rio even managed a week of a 400mt a year run-rate in the Pilbara - a record. It has maintained guidance of 324-334mt and a cash cost of $14-15/t, including a $0.5/t Covid-19 increase.
Refined copper production was down more than two-thirds year-on-year in the June quarter because a March earthquake at the Kennecott mine in the US knocked out processing capacity. Rio is also in a corporate fight over its handling of the Oyu Tolgoi underground project.
It is the operator for the mine through its 50.8 per cent holding of Turquoise Hill Resources (Can:TRQ), which in turn has 66 per cent of the asset. Turquoise Hill shareholder Pentwater Capital is pushing for a board seat at the 24 July general meeting. Its calls for greater transparency from Rio and more accountable management have been backed by proxy advisor ISS this week, which said there were “legitimate concerns around governance, delays, cost overruns and the company’s disclosure regarding the gravity of funding shortfalls”.
Compared to initial plans, Oyu Tolgoi’s underground operation will cost $1.2-$1.9bn on top of the original $5.3bn estimate. One cost saver has been the Mongolian government taking on the $1bn coal power plant needed for the site under an agreement that power would eventually come from a domestic source instead of being imported from China.