Production was 51.8 million metric tons in the three months to June 30, compared with 48.6 million tons a year earlier, the London-based company said today in a statement. That compares with the 51.2 million ton median estimate of seven analysts surveyed by Bloomberg.
The expansion at its Australian iron ore operations to 290 million tons of annual capacity is on track to start this quarter, Rio said today, even as it seeks to sell assets and reduce $5 billion of costs as the cooling mining boom forces producers to trim spending. Growth in China, Rio’s biggest customer, slowed for a second quarter as gains in factory output decelerated.
“I don’t think anyone really knows where China is going to be in a year’s time,” Chris Weston, chief market strategist at IG Markets in Melbourne said by phone. “I see the materials sector as a good trading sector, I don’t see it as a good investment sector.”
Rio, the second-largest iron-ore exporter behind Vale SA, climbed after the announcement. It rose 1.4 percent to A$55.52 at the close of trade in Sydney, compared with A$55.00 before the announcement.
The company also raised its full-year copper production forecast following a faster than expected recovery from a land slip at its Bingham Canyon mine in Utah.
Rio is scheduled to report first-half earnings on Aug. 8. Net income may drop 17 percent to $4.9 billion for the period, according to the average of four estimates compiled by Bloomberg.
An iron ore expansion to 360 million tons, from 290 million tons, in Australia’s Pilbara region is currently underway, with Rio evaluating a number of options for the estimated $5 billion project.
The company could achieve the growth in output by developing new mines, or by boosting output from existing mines, it said. The spending plan has drawn criticism from shareholders including Evy Hambro, who manages BlackRock Inc. (BLK)’s $6.9 billion World Mining Fund.
Rio’s board is due to consider the expansion during the fourth quarter. Rio’s capital spending will drop to about $13 billion this year from $17 billion last year, Chief Executive Officer Sam Walsh, who took over in January, said in May.
Iron ore contributed $12.5 billion, or 43 percent, of Rio’s revenue during the first half of 2012, according to data compiled by Bloomberg. Rio expects to produce about 265 million tons of iron ore this year, it said.
“Our iron ore operations continue their impressive performance, with period-on-period productivity improvements,” Walsh said, according to today’s statement. “One of our key priorities this year is to deliver our growth projects.”
Repairs at its Bingham Canyon mine were advancing better than expected, Rio said. Full-year production of mined and refined copper is projected to fall short of pre-slide expectations by 100,000 tons and 75,000 tons, respectively, it said. That’s a 25,000 ton improvement compared to estimates provided immediately following the slide.
The wall failure occurred on April 10 and no one was hurt. Total mined copper production for the quarter was 146,000 tons, up 10 percent on last year, and compares with a 138,000 tons forecast by UBS AG. In 2013, Rio Tinto’s share of mined and refined copper output is expected to be about 565,000 tons and 230,000 tons, respectively.
The company made the first commercial shipments this month from its $6.6 billion Oyu Tolgoi copper mine after months of tension with the Mongolian government.
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