Fourth Quarter 2009 Operation

RNS Number : 5241F

Rio Tinto PLC

14 January 2010

 



Fourth quarter 2009 operations review

14 January 2010

Chief executive Tom Albanese said: "We are seeing recovery across most of our key commodities, although we continue to be cautious on the state of the global economy going into 2010 as stimulus packages start to wind down. This was another very strong quarter for iron ore production, driven by continuing high demand from China. In the Pilbara we achieved record sales for both the quarter and the full year and both global and Pilbara production set new records in 2009. We made good progress in divestments with $1.85 billion of sales completed in the fourth quarter and have now agreed sales of $10.3 billion since we began the divestment programme in 2008." 

• Rio Tinto's global iron ore production was up 49 per cent compared with the fourth quarter of 2008. Global iron ore sales set a new quarterly record of 61 million tonnes (100 per cent basis). Rio Tinto's global iron ore production in 2009 exceeded 217 million tonnes (172 million tonnes on an attributable basis), a 13 per cent increase on 2008, and also a new record. 

• Pilbara iron ore production was 56 million tonnes (45 million tonnes on an attributable basis), up 54 per cent on the fourth quarter of 2008. The Pilbara system consistently operated above its nameplate capacity in order to supply continuing strong growth in demand. 

• Mined copper production was up 36 per cent on the fourth quarter of 2008 with higher production at all operations, notably at Escondida and Grasberg. 

• Refined copper production was up 15 per cent on the fourth quarter of 2008 following higher concentrate grades and a further improvement in performance at Kennecott Utah Copper. 

• Mined gold production exceeded 1.1 million ounces in 2009, 141 per cent above 2008, attributable to higher grades at Kennecott Utah Copper and Grasberg.

• Production cutbacks were maintained in the Aluminium group in response to market conditions. Bauxite production was down one per cent, alumina down two per cent and aluminium down three per cent, compared with the fourth quarter of 2008. At the end of 2009 Rio Tinto Alcan's annual run rate was nine per cent lower than at the start of the year. 

• Australian thermal coal production was up five per cent on the fourth quarter of 2008. Australian hard coking coal production was down two per cent on the same period.

• Uranium production was down 20 per cent on the fourth quarter of 2008 due to lower grades at ERA. 2009 full year uranium production was consistent with the prior year. 

• On 5 December 2009 Rio Tinto and BHP Billiton announced that they had signed binding agreements on the proposed iron ore production joint venture that cover all aspects of how the joint venture will operate and be governed. Rio Tinto and BHP Billiton anticipate completion of the production joint venture in the second half of calendar year 2010.

All currency figures in this report are US dollars, and comments refer to Rio Tinto's share of production, unless otherwise stated

CORPORATE ACTIVITY

During 2009 Rio Tinto announced asset sales totalling $7.2 billion, of which $3.6 billion completed in 2009. Since February 2008, Rio Tinto has announced agreed asset sales of $10.3 billion. 

In the fourth quarter of 2009 the Group realised $1.85 billion as follows:

Date	Transaction	Consideration	Comments
1 October	Jacobs Ranch coal mine	$764m
20 November	Cloud Peak IPO	$741m	IPO proceeds and cash distribution from connected debt offering
1 December	Alcan Composites	$349m

The following divestments are expected to complete during the first quarter of 2010:

Divested division	Consideration	Comments
Alcan Packaging Food Americas	$1.2 bn	Subject to US regulatory approval.
Alcan Packaging global pharmaceuticals, global tobacco, food Europe and food Asia divisions	$2.025 bn	On 23 December 2009, Rio Tinto announced that it had accepted the Amcor offer following completion of the required Works Councils consultations.
Maules Creek and Vickery undeveloped coal projects	$306m (Rio Tinto share 75.7 per cent)	Coal & Allied announced A$480m consideration for Maules Creek and A$31.5m for Vickery

All sales proceeds referred to above are before relevant taxes and fees.

During the fourth quarter of 2009, Richards Bay Minerals (RBM) concluded a Broad Based Black Economic Empowerment (BBBEE) transaction with a consortia of local business and community groups. Rio Tinto's share of RBM production data reflects a decrease from 50 per cent to 37 per cent with effect from 1 December 2009.

IRON ORE

Rio Tinto share of production (000 tonnes)

	Q4 09	vs Q4 08	vs Q3 09	FY 09	vs FY 08
Hamersley	33,917	+53%	-3%	122,751	+12%
Hope Downs	2,844	+71%	-6%	10,317	+89%
Robe River	8,037	+53%	+3%	28,841	+8%
IOC (pellets and concentrate)	2,432	+7%	+83%	8,129	-13%

Markets

Sales volumes from the Pilbara region of Western Australia continued at record levels and exceeded 56 million tonnes during the fourth quarter (100 per cent basis), an increase of one per cent on the third quarter and 68 per cent higher than the corresponding quarter of 2008. Shipments to all major markets, including the largest single market, China, were maintained at a high level and were primarily priced on a benchmark or its equivalent provisional basis. 

Pilbara operations

Fourth quarter production of 56 million tonnes (45 million tonnes on an attributable basis) was two per cent lower than the previous quarter following planned maintenance, and represented a 54 per cent increase on the corresponding quarter of 2008, when production was cut back in line with customer delivery requirements. 

The Pilbara system consistently operated at a run-rate in excess of its nameplate capacity of 220 million tonnes per annum during the second half of 2009. This reflected the successful implementation and optimisation of new infrastructure, control systems and recent mine expansions. The Operations Centre continued to enhance performance as it neared the final stages of construction and ramp-up. 

Work progressed on or ahead of schedule on the Mesa A and Brockman 4 mines to secure the capacity of the Pilbara mines at around 220 million tonnes per annum. Both mines are expected to commence production in the first half of 2010. 

Iron Ore Company of Canada (IOC)

Rio Tinto's share of fourth quarter production at IOC was 2.4 million tonnes of pellets and concentrate, a seven per cent increase on the same quarter of 2008 and 83 per cent higher than the third quarter when a five week shutdown took place. The fourth quarter performance reflected additional heavy mobile equipment and pellet production operating at full capacity.

HIsmelt

The HIsmelt pig iron plant in Western Australia remains on a care and maintenance programme to April 2010, due to depressed global pig iron prices.

Dampier Salt

Fourth quarter salt production declined 31 per cent compared with the corresponding quarter of 2008. There was no production at Lake Macleod in October 2009 due to planned maintenance on a radial stacker and no production at Port Hedland in November and December during the changeover of the wet salt haulage contract.

COPPER

Rio Tinto share of production

	Q4 09	vs Q4 08	vs Q3 09	FY 09	vs FY 08
Kennecott Utah Copper
Mined copper (000 tonnes)	66.8	+5%	-12%	303.5	+28%
Refined copper (000 tonnes)	72.9	+24%	+8%	274.2	+37%
Molybdenum (000 tonnes)	3.4	+74%	+1%	11.3	+7%
Mined gold (000 ozs)	159	+56%	+15%	584	+56%
Refined gold (000 ozs)	147	+104%	+32%	479	+58%
Escondida
Mined copper (000 tonnes)	85.9	+30%	+10%	318.3	-17%
Refined copper (000 tonnes)	24.0	+9%	-4%	98.2	+27%
Grasberg JV
Mined copper (000 tonnes)	32.5	+1725%	+29%	107.7	+1413%
Mined gold (000 ozs)	187	n/a*	+59%	429	n/a*

* There was no gold share allocated to Rio Tinto under the joint venture metal strip share in 2008. 

Kennecott Utah Copper

Fourth quarter mined copper production increased by five per cent and annual production rose 28 per cent in line with improved concentrator performance following the optimisation of the flotation circuit. Molybdenum production improved 74 per cent compared with the same quarter of 2008 when mining was focussed on copper largely due to the deterioration of the molybdenum market in late 2008.  

Refined metal output benefited from high mine production during the year and improved smelter performance during the fourth quarter. A 19 day maintenance shutdown is planned for the smelter during the second quarter of 2010. 

Escondida

Mined copper for the fourth quarter increased by 30 per cent compared with the corresponding period of 2008, mainly attributable to higher concentrator head grades which more than offset a ten per cent decline in concentrator throughput in the period. Refined copper production for the quarter improved by nine per cent compared with the prior year due to the continuing ramp-up of sulphide leach cathode production. Refined production declined by four per cent compared with the third quarter of 2009 due to a one week shutdown of facilities during the fourth quarter. 

For the full year, mined copper production declined by 17 per cent compared with 2008, mainly due to lower throughput linked to the reduced SAG mill availability and lower head grades during the first half of the year.

Grasberg

Rio Tinto's share of joint venture copper and gold was significantly higher in 2009 compared with 2008 due to improved ore grades, higher ore treated and consequently an increased allocation in accordance with the metal strip calculation. There was no gold production allocated to Rio Tinto under the joint venture metal strip share in 2008. Freeport is due to release its 100 per cent operating data for the fourth quarter on 21 January 2010.

ALUMINIUM

Rio Tinto share of production (000 tonnes)

	Q4 09	vs Q4 08	vs Q3 09	FY 09	vs FY 08
Rio Tinto Alcan
Bauxite	9,072	-1%	+22%	30,696	-12%
Alumina	2,282	-2%	+3%	8,815	-2%
Aluminium	957	-3%	+0%	3,803	-4%

Bauxite

Fourth quarter bauxite production was one per cent lower than the same quarter of 2008 and 22 per cent higher than the previous quarter. Production at Weipa increased by 25 per cent compared with the third quarter due to rising third party demand. 

Alumina

Fourth quarter alumina production was two per cent lower than the same quarter of 2008 and two per cent lower for the full year, following production cuts at the Vaudreuil (Jonquiere) and Gardanne alumina refineries announced in early 2009. These production cuts offset record annual production at the Queensland Alumina, Yarwun, Gove and Sao Luis (Alumar) refineries. 

Gove and Alumar continued to ramp up their expansions and presented annual production increases of eight per cent and ten per cent, respectively. 

In the fourth quarter of 2009, Rio Tinto Alcan restarted idled capacity at the Vaudreuil refinery in Quebec, in response to improving alumina market conditions.

Aluminium

Fourth quarter aluminium production was three per cent lower than the same quarter of 2008. Annual production was four per cent lower than 2008. 

During 2009 Rio Tinto announced the sale of the Ningxia smelter in China, the closure of the Beauharnois smelter in Quebec, the cessation of smelting activities at the Anglesey smelter in Wales and various other curtailments. At the end of 2009 Rio Tinto Alcan's annual run rate was nine per cent lower than at the start of the year.

ENERGY

Australian coal

Rio Tinto share of production (000 tonnes)

	Q4 09	vs Q4 08	vs Q3 09	FY 09	vs FY 08
Rio Tinto Coal Australia
Hard coking coal	2,119	-2%	+2%	7,467	+0%
Other coal	6,022	+5%	-0%	23,103	+5%

Hard coking coal production from the Queensland coal operations decreased by two per cent, compared with the same quarter of 2008 following a planned longwall changeover at the Kestrel mine in October 2009. 

Fourth quarter production of thermal and semi-soft coal was five per cent higher than the corresponding quarter of 2008, primarily attributable to an increase in port allocations.

An investment in port capacity at the Dalrymple Bay Coal Terminal was completed in the third quarter of 2009. Additional rolling stock and track expansions will be delivered to the rail provider in 2010 to allow this capacity to be fully utilised. The expansion of the Port Waratah Coal Services (PWCS) facility was completed in the fourth quarter of 2009. 

US thermal coal

Rio Tinto share of production (000 tonnes)

	Q4 09	vs Q4 08	vs Q3 09	FY 09	vs FY 08
US Coal	17,095	-50%	-47%	109,520	-16%

On 20 November 2009, Rio Tinto completed the initial public offering of Cloud Peak Energy Inc. As a result, Rio Tinto now holds a 48.3 per cent interest in the Antelope, Cordero Rojo and Spring Creek mines and a 24.1% interest in the Decker mine. These interests were formerly reported under Rio Tinto Energy America and are now managed by Cloud Peak Energy.

Prior to that, on 1 October 2009 Rio Tinto completed the sale of the Jacobs Ranch mine, which had previously been reported within Rio Tinto Energy America.

The table above reflects the changed shareholdings and includes the 100 per cent owned Colowyo mine. 

Uranium

Rio Tinto share of production (000 lbs)

	Q4 09	vs Q4 08	vs Q3 09	FY 09	vs FY 08
Energy Resources of Australia	1,663	-33%	-22%	7,865	-2%
Rössing	1,697	-1%	+3%	6,275	+2%

Rio Tinto's share of fourth quarter uranium production was 20 per cent lower than the corresponding quarter of 2008. Fourth quarter production at ERA was 33 per cent lower than the corresponding quarter of 2008, due to lower mill head grade attributable to mine scheduling. This was partially offset by improved plant performance. 

DIAMONDS

Rio Tinto share of production (000 carats)

	Q4 09	vs Q4 08	vs Q3 09	FY 09	vs FY 08
Argyle	3,504	-33%	+54%	10,591	-30%
Diavik	918	-41%	+85%	3,339	-40%

Argyle continued to ramp up production in the fourth quarter following the decision to shut operations in the second quarter to balance production with market demand. Production was 33 per cent lower than the same quarter of 2008. Markets recovered during the fourth quarter but remained below prior year levels. 

Fourth quarter carat production at Diavik was 41 per cent lower than the same quarter of 2008 as the mine reduced operating levels in response to weaker market conditions. Carat production recovered 85 per cent compared with the third quarter when the six week summer shutdown took place. 

Production at all Rio Tinto Diamonds operations was closely monitored throughout the year to limit inventory build up. 

  MINERALS

Rio Tinto share of production (000 tonnes)

	Q4 09	vs Q4 08	vs Q3 09	FY 09	vs FY 08
Borates	109	-9%	-12%	424	-31%
Titanium dioxide feedstock	325	-12%	+97%	1,147	-25%

Minerals production continued to be affected by lower demand in line with reduced economic activity across all major regions. In addition, planned maintenance shutdowns occurred during the quarter and reductions in inventory levels were targeted. 

Fourth quarter borates production was down nine per cent on the same quarter of 2008 and was 12 per cent lower than the third quarter as a result of year end shutdowns for scheduled maintenance. Fourth quarter talc production increased by 18 per cent compared with the same period of 2008, as European markets staged a modest recovery. 

Fourth quarter titanium dioxide feedstock production continued to be impacted by weak market conditions, although production ramped up after the eight week shutdown at QIT in the third quarter. Production reflects the BBBEE transaction completed by RBM with effect from 1 December 2009. 

EXPLORATION AND EVALUATION 

Pre-tax and pre-divestment expenditure on exploration and evaluation charged to the profit and loss account in 2009 was $514 million compared with $1,135 million in 2008. In 2009 the Group realised $903 million (pre-tax) from the divestment of exploration properties, including $818 million pre-tax ($797 million post-tax) from the divestment of its undeveloped potash assets in Argentina and Canada.

Exploration highlights

In the Amargosa district of coastal Brazil, ground-penetrating radar surveys successfully mapped bauxite mineralisation to depths of up to 40m. A combination of drilling and radar surveys will be utilised in 2010 for resource estimation on the project. 

In Utah, drilling within 3km of the Bingham Canyon copper mine has identified a new copper-molybdenum-gold porphyry system. Delineation drilling is now underway with numerous other geophysical targets to be tested in 2010 within the Bingham mine orbit. 

On the Orientale iron ore project in northeast DRC, mapping and sampling continued over the Mount Asonga high-grade hematite prospect. 

A summary of activity for the period is as follows:

Product Group	Advanced projects	Greenfield programmes
Aluminium	Amargosa, Brazil.	Australia, Brazil, Guyana, Laos.
Copper	Copper: Bingham Orbit, US. Nickel: Tamarack, US.	Copper: Chile, US, Peru, Russia, Kazakhstan.
Diamonds & Minerals		Diamonds: India, Canada, Democratic Republic of Congo.
Energy	Coal: Altai Nuurs, Mongolia.	Coal: South Africa, Tanzania, Mozambique.  Uranium: Australia, Jordan.
Iron Ore	Pilbara, Australia.	Democratic Republic of Congo.

Mine-lease exploration continued at a number of Rio Tinto businesses including Kennecott Utah Copper, Escondida, Northparkes, Rössing, Diavik and Pilbara Iron. Exploration at ERA focussed on supporting the evaluation of the Ranger 3 Deeps and heap leach projects.

Pre-feasibility or feasibility work progressed on a number of projects including Resolution (copper/gold, US), La Granja (copper, Peru), Eagle (nickel/copper, US), Bunder (diamonds, India), Simandou (iron ore, Guinea) and several Pilbara iron ore deposits.

About Rio Tinto 

Rio Tinto is a leading international mining group headquartered in the UK, combining Rio Tinto plc, a London and NYSE listed public company, and Rio Tinto Limited, which is a public company listed on the Australian Securities Exchange.

 

Rio Tinto's business is finding, mining, and processing mineral resources. Major products are aluminium, copper, diamonds, energy (coal and uranium), gold, industrial minerals (borax, titanium dioxide, salt, talc) and iron ore. Activities span the world but are strongly represented in Australia and North America with significant businesses in South America, Asia, Europe and southern Africa.

For further information, please contact:

Media Relations, London  Nick Cobban Office: [phone] Mobile: [phone] Christina Mills Office: [phone] Mobile: [phone]	Media Relations, Australia  David Luff Office: [phone] Mobile: [phone]  Tony Shaffer Office: [phone]  Mobile: [phone]
Media Relations, Americas  Tony Shaffer Office: [phone]  Mobile: [phone]	Media Relations, Canada Stefano Bertolli Office:: [phone] Mobile: [phone]
Investor Relations, London Mark Shannon Office: [phone] Mobile: [phone] David Ovington Office: [phone] Mobile: [phone] Investor Relations, North America Jason Combes Office: [phone] Mobile: [phone]	Investor Relations, Australia Dave Skinner Office: [phone] Simon Ellinor Office: [phone] Mobile: [phone]

Email: [e-mail]

Website: www.riotinto.com

 

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