THE halcyon days are over but Rio Tinto looks well placed to deliver a healthy full year profit next month after achieving record iron ore shipments in 2013.
The mining giant eked out more production from its global mines while slashing operating cash costs in 2013 by more than the $US2 billion (K5 billion) it had targeted, raising hopes of strong shareholder returns.
Those measures aim to offset a fall in commodity prices since the peak of the mining boom in early 2011, including a 33 percent fall in iron ore prices since then to currently below $US130 (K326) a tonne.
Rio, which is Australia’s largest producer of the nation’s most valuable export, beat its own guidance to produce a record 266 million tonnes and shipped 259 million tonnes of the steelmaking commodity.
The company’s shares had jumped $1.31 (K3.29), or 2.0 per cent, to $65.55 (K164) by 1500 AEDT, below the $68.18 (K171) at which it started the year.
Rio Tinto’s share, excluding joint venture partners such as Gina Rinehart’s Hancock Prospecting, is 209 million tonnes.
That means it is close to completing the current ramp up to 290 million tonnes a year.
The world’s iron ore giants, including Rio, BHP Billiton, Vale and Australia’s Fortescue Metals, are pressing on with costly expansions backing their faith in Chinese demand amid concerns about a possible supply glut and price falls.
Rio’s iron ore result came after shipments rose 6.0 per cent from the previous quarter to 72.4 million tonnes in the December quarter, missing expectations but coming as cyclone Christina closed port and rail operations in Western Australia for the last three days of the year.
Rio chief executive Sam Walsh said as well as exceeding cost cutting targets the company generated $US3.5 billion (K8 billion) in non-core asset sales.
When he was appointed last year, Mr Walsh said slashing costs and capital expenditure was a priority as debt peaked at $US22 billion (K52 billion) and Rio posted its first ever full-year loss on the back of $US14 billion (K35 billion) in write downs on aluminium and coal projects.
He said the fourth quarter operational results were excellent and delivering on Rio’s commitments.
"These actions, together with lower capital expenditure in 2013 and beyond, will ensure that Rio Tinto is well positioned to deliver greater value to shareholders," he said.
Fat Prophets mining analyst Dave Lennox said while weaker commodity prices would prevent record profits, Rio would get significant help from the Australian dollar’s fall in 2013, as it traded in US currency.
"They have done the two things you do when you can’t get profit from just price increases: you increase volume where possible and lower costs where possible," he told AAP.
Cutting more costs would be difficult from now on after doing the obvious things, he said.
Outside iron ore, which is easily its biggest earner, Mr Walsh highlighted an increase in copper volumes and record annual production for both bauxite – used to make aluminium – and thermal coal. – AAP