Rio Tinto output hit by bad weather

Sydney - Rio Tinto reported worse falls than expected in iron ore and copper production in the first quarter after it was hit by bad weather, knocking the global miner’s shares lower.

Rio Tinto, the world’s second-biggest producer of iron ore after Vale and a key supplier to the Chinese steel sector, said its share of production from mines it owns outright and in joint ventures dropped 11% to 45.6 million tonnes in the quarter versus 51.2 million tonnes in the previous quarter.

Analysts had been expecting output closer to 50 million tonnes.

Iron ore production on a 100% basis in the March quarter was 59 million tonnes versus 65 million in the previous quarter.

The shortfall has been helping shore up seaborne-traded iron ore prices despite slowing demand from China, the biggest buyer of Australian ore.

Mined copper output fell 13% to 119 500 tonnes against analysts’ forecasts of above 140 000 tonnes.

Rio Tinto gave no detailed commentary on demand, but there have been market concerns that commodity imports by China will drop off this year in step with slowing industrial growth.

China is the single largest buyer of Australian iron ore.

Heavy rain and two early-season cyclones drenched Rio Tinto's Paraburdoo mines during the quarter, while high sea swells generated by cyclones disrupted freighter movements at the ports of Dampier and Cape Lambert, used by Rio to ship all its Australian ore.

However, that was not as bad as a year earlier, when operations on the east and west coast were hit by bad weather.

"We had a solid first quarter with increased production of iron ore, coal, bauxite, alumina and titanium dioxide compared with the first quarter of 2011," Rio Tinto CEO Tom Albanese said in its latest quarterly operations report.

Rio Tinto shares, which had been trading higher ahead of the production report, fell nearly 1% after the release and last traded down 0.9% at A$64.60. The broader market fell 0.3%.

Rival BHP Billiton [JSE:BIL] is expected to report weather-related disruptions to its Australian iron ore operations on Wednesday.

In aluminium, where Rio Tinto is one of the world’s top producers, output fell to 854 000 tonnes from 961 000 tonnes in the previous quarter and 944 000 tonnes in the year-ago period.

Rio signalled a major retreat from its aluminium business last October when it unveiled plans to sell 13 assets, including smelters and alumina refineries, only four years after buying aluminium giant Alcan in one of the sector’s biggest ever deals.

Aluminium prices have shed about a fifth of their value since touching a peak of $2 800 per tonne in May last year, and analysts estimate about 30% of global aluminium operations are loss-making.

The sale, which would leave Rio Tinto's remaining aluminium business focused mainly on its more profitable Canadian operations, is designed to help the group boost its aluminium earnings’ margins to 40%, up from 20% last year.