IGO to record impairment against nickel assets in strategy shift
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Rio Tinto (ASX, LON:RIO), the world’s second largest iron ore miner, has once again cut its production guidance for the commodity, this time due to operational problems, particularly in the Greater Brockman hub in Australia’s Pilbara region.
The company now expects to produce between 320 and 330 million tonnes of the steel making ingredient in 2019, down from a previous guidance of 333 to 343 million tonnes.
“Given the change in volume guidance, unit costs will be updated in the second quarter operational review [due on July 16],” Rio said in the statement. The company had been targeting unit costs of around $13 a tonne for 2019.
The news come on the same day its rival Vale (NYSE:VALE), the world’s no.1 iron ore producer, announced that it was is ready to fully resume operations at its Brucutu mine, the largest in the Minas Gerais state, within 72 hours.
The iron ore mine has been operating at a third of its 30 million tonne a year capacity since February, so its reopening is expected to bring 5.4 million tonnes of production forward this year.
Rio’s new forecasted output, however, will offset Vale’s restart, BMO analyst Edward Sterck said in a note Wednesday. He sees the announcement adding further tightness to the market and support iron ore prices.
“This is the third restart announcement since 21 March, so further delays cannot be discounted. Nonetheless, a restart could ease pressure on the iron ore price, although we note this announcement coincides with a 10m cut to iron ore guidance from Rio,” Sterck said.
The miner last cut his full-year iron ore production outlook in April, after reporting a 14% drop in iron ore shipments in the first quarter, amid disruption caused by a tropical cyclone that hit its export terminal in Western Australia.
Iron ore prices have climbed this year on the back supply disruptions and record steel production in China.
