Rio Tinto hit by cost blowout at Oyu Tolgoi

Rio Tinto hit by cost blowout at Oyu Tolgoi

Rio Tinto hit by cost blowout at Oyu Tolgoi

Rio said: "All options under consideration present a pathway to sustainable first production, and have different cost and schedule implications". The higher price is expected to underline a bumper cash result for Rio when it releases its half year results next month, which in turn could mean hefty dividend payments to shareholders. This range includes contingency of up to eight months reflecting the "unexpected and challenging geotechnical issues, complexities in the construction of shaft 2 and the detailed work still required to reach a more precise estimate", Rio said.

In other commodities, second quarter mined copper production fell 13%, bauxite production rose 1%, aluminium production was flat and titanium dioxide production rose 31%.

'The impacts of cyclone Veronica continued into the second quarter, with repairs to the Cape Lambert A port facilities impacting Robe Valley and Yandicoogina shipments and operations, ' Rio Tinto said.

"With the exception of iron ore production and shipments, which both exceeded our estimates, the production results across the other business units were broadly in line with our estimates".

That's a rise of 36% and means Rio will report a surge in revenue next month for the six months to June from iron ore operations.

Iron ore production from the Pilbara region of Australia came out at 79.7mln tonnes in the second quarter, which was down 7% compared to the same period last year, though up 5% on the first three months of this year.

Iron ore prices have soared in 2019, after the collapse of a Vale tailings dam in Brazil killed more than 240 people in January and unleashed a series of cascading events that is expected to cut Vale's annual iron ore production by about 67 million tonnes this year.

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"We saw a challenging operational performance across our portfolio in the first half, while also investing in future growth at Richards Bay Minerals and Resolution", said Rio chief executive Jean-Sebastien Jacques.

As of Monday (July 15), copper was trading at US$5,997 per tonne on the London Metal Exchange.

But they said the good iron ore production numbers were offset by the Oyu Tolgoi delays. Royal Bank of Canada set a GBX 3,900 ($50.96) target price on Rio Tinto and gave the company a "sell" rating in a research note on Wednesday, June 19th.

RBC Capital Markets said in a note to clients that iron production and shipments over the quarter were better than expected.

The industry benchmark price for a tonne of iron ore closed at $US121.40 on Monday, 61 per cent above the price the day before the Brazil dam disaster.

Shares of the smaller, $1.2-billion company fell by nearly 44 percent on Tuesday, ending the day at $0.60 per share.

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