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Rio Results: Rio falls short of expectations on iron ore and copper in March quarter, but says 2024 is on track
Mining
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- Rio Tinto falls shy of analysts expectations on iron ore and copper output in March quarter
- But calls operating results ‘stable’, leaving 2024 guidance unchanged
- Stance on ill-fated Jadar project the ultimate copy-paste job
Rio Tinto (ASX:RIO) has eaten a 1% loss early doors after missing analyst forecasts on iron ore and copper production in the March quarter.
The world’s top iron ore exporter shipped 78Mt in the three months to March 31 as wet weather hit port operations in the Pilbara, down 5% on the same quarter in 2023 and 10% on a strong December quarter.
Analyst consensus had been 78.7Mt. Meanwhile, its mined copper output rose 7% YoY and was down 3% QoQ to 156,000t, a tad shy of the 164,000t analyst consensus.
Rio was largely in line on its bauxite (up 11% YoY to 13.4Mt), aluminium (+5% to 826,000t) and Iron Ore Company of Canada operations (+3% to 2.6Mt), while its titanium dioxide slag production slid 11% YoY and 8% QoQ to 254,000t.
Three of its nine furnaces were offline in the quarter at its Quebec processing business.
While the early results were a miss, it’s still early in 2024 and Rio tends to run hardest in the December half.
With that in mind, guidance on costs and production in its iron ore and copper businesses (323-338Mt and 660,000-720,000t respectively) remain unmoved.
RBC’s Kaan Peker said Rio’s results are likely to improve sequentially through the year.
“A marginally weaker than expected 1Q to start CY24 on softer iron ore and copper volumes,” he said in a note.
“Importantly, all guidance was maintained, and the production misses are not significant and namely isolated to 1Q, nevertheless, it will likely lead to small negative consensus EPS/FCF revisions for CY24.
“Copper and Iron Ore volumes should sequentially increase over 2024, plus it was re-assuring to see OT underground lift mill throughput (to 5.2Mtpa).
“We have a A$132/sh price target and Sector Perform rating on RIO. 1) RIO provides compelling FCF/div yield (7%/6%) and strong balance sheet; 2) strong copper equivalent growth (5-6% CAGR) over next 2 years, 3) but is trading line with our PT.”
The easiest gig at Rio Tinto
Rio Tinto (ASX:RIO) is still hell-bent on the development of Jadar if it can convince the Serbian Government to let it do its thing.
Internally this seems to be a ‘when not if’ thing, even if that approach stretches credulity and makes you wonder what Kool-Aid the executive rank and file are drinking.
The happiest person about the current situation must be whatever media staffer is tasked with the project update portion of the quarterly results, who has had the luxury of pressing CTRL-C/CTRL-V on this paragraph for several quarters now.
Maybe one day they’ll be the proverbial broken clock.
More is happening at Rincon, the Argentine brine operation where a starter lithium plant will be in operation from the end of this year.
RIO is adding another 400 beds to the 500 bed camp already constructed as it progresses studies for a full-scale project and conducts an exploration campaign to expand the Rincon basin, brine and water reservoirs.
China recovery uneven
RIO says China’s economic recovery remains uneven, noting the continued weakness in the property market ‘despite improved policy support’ but strong growth in manufacturing due to increased industrial production and exports.
After a bumper year of steel exports in 2023, Rio said the transfer of Chinese steel overseas was again supporting a strong iron ore market.
Prices averaged around US$123/t in the March term, 4% down on a strong December quarter and are currently fetching US$111/t.
“China’s domestic steel demand trended at levels similar to last year, but steel exports rose 30% year-on-year during the first two months and are likely to remain historically elevated, in turn, supporting iron ore demand,” Rio said.
“Seaborne shipments in the first quarter rose 1% year-on-year and China’s portside inventories increased by 24 million tonnes to 144 million tonnes.
“Steel mill margins in China oscillated around break-even levels, maintaining iron ore product price relativities within historically narrow bands, while lump premiums declined in the absence of pollution controls and sintering restrictions in China.”
RIO CEO Jakob Stausholm said the mining giant delivered stable results across its operations and was continuing to progress its multi-billion dollar Simandou development in Guinea.
But he also noted the plane crash in Canada which killed four employees at the Diavik diamond mine and two airline crew members.
“This tragedy has strengthened our resolve to never be complacent about safety,” Stausholm said.
