Rio still cautious on short-term volatility

“In the first quarter, most of our operations continued to run at capacity. Chinese demand grew strongly and we saw some recovery in OECD markets, but we are still cautious about short-term volatility,” he said.
“…we are now ramping up our growth projects with sustained investment in our iron ore business and the start of development of Oyu Tolgoi (copper/gold).”
Rio Tinto’s global iron ore production was up 39 per cent compared with the first quarter of 2009, when heavy rains disrupted operations. Pilbara iron ore production was 53 million tonnes (41 million tonnes on an attributable basis), up 48 per cent on the first quarter of 2009.
The Pilbara system continued to operate at or close to its nameplate capacity during the quarter with production for the 12 months to March 31st, totalling 219 million tonnes.
On April 9th, Rio Tinto announced that it is negotiating contracts with its customers to supply iron ore priced on a quarterly basis, following similar moves from other producers namely BHP Billiton and Vale.
Sales volumes from the Pilbara region of Western Australia were sustained at high levels of 53 million tonnes during the quarter, a decline of six per cent on the record fourth quarter and 34 per cent higher than the corresponding quarter of 2009.
On March 19th, Rio Tinto announced the signing of a non-binding memorandum of understanding (MoU) to establish a joint venture covering the development and operation of the Simandou iron ore project in Guinea. Chinalco will acquire a 47 per cent interest in the new joint venture by providing US$1.35 billion on an earn-in basis through sole funding of ongoing development work over the next two to three years.
In other areas of its business, Rio Tinto recorded a decrease in mined copper production, down 16 per cent on the first quarter of 2009 primarily due to lower grades at Kennecott Utah Copper and Grasberg.
Mined gold and molybdenum production were 12 per cent and 58 per cent higher than the first quarter of 2009, mainly attributable to higher grades at Kennecott Utah Copper.
Australian hard coking coal production was up 35 per cent on the first quarter of 2009. Australian thermal coal production was down eight per cent on the same period.
Uranium production was down 20 per cent on the first quarter of 2009 due to lower grades at ERA and Rössing.
Expenditure on exploration and evaluation in the first quarter of 2010 was US$98 million compared with US$127 million in the same period of 2009. During the quarter the group realised US$26 million (pre-tax) from the divestment of central exploration properties, compared with US$68 million in the same period of 2009.
Rio Tinto said that it will continue to fund a number of major evaluation projects in 2010. Studies will continue into the step change expansion of iron ore production capacity in the Pilbara to 330 million tonnes per annum by 2015.
Detailed design and engineering work on the Cape Lambert port expansion are scheduled to be completed by the end of 2010. Other major evaluation projects include the Simandou iron ore project and the La Granja and Resolution copper projects.