Rio Tinto Results: We made guidance *cheers*, we missed on costs *boos*

Rio Tinto is the first cab off the rank to deliver production results for the December Quarter
And it made guidance!
Iron ore shipments of 321.6Mt came within its 320-335Mt range; costs on the other hand came in high in a harbinger of the inflation chatter to come this reporting season

Rio Tinto (ASX:RIO), the mining giant which has made a sport of missing guidance at its flagship Pilbara iron ore operations in recent years scraped through to hit the lower end of its 320-335Mt target range.

Rio Tinto beat consensus in the fourth quarter, shipping 87.3Mt to hit a full year rate of 321.6Mt, virtually unchanged from 2021 levels.

Its fourth quarter shipping rate was up 4% on the same period in 2021 and 5% on the September quarter, with Rio completing its customary dash to the finish line after a weak first half.

That’s the good news. The bad news is its costs are expected to be slightly above the top end of its US$19.5-21/t guidance range, mainly due to inflation, diesel prices and labour. Guidance for 2023 remains unchanged at 320-335Mt at costs of US$21-22.5/t.

Inflation will also see Rio cop an increase charge on closure liabilities costing US$1.3b in pre-tax underlying earnings, including a US$1.1b full year increase in amortisation.

Lower prices across its various commodities will likely see lower full year earnings.

Iron ore sales averaged US$97.6/wmt across 2022, down from US$132.3/wmt in 2021. But prices have rebounded in late 2022 and early 2023, rising to around US$120/t from lows of under US$80/t seen in October last year on enthusiasm around China’s emergence from its Covid austerity.

Also positively, Rio CEO Jakob Stausholm said the second half of 2022 was a record performance for Rio from its mine and rail system, with nameplate capacity expected to be hit at its new 43Mtpa Gudai-Darri mine in 2023.

Also in 2023 a scoping study on the proposed major Rhodes Ridge development in the Pilbara is due, alongside progress at its Western Range development once JV partner Baowu secures Chinese approvals and sustaining projects at Hope Downs and Brockman 4.

Notably Rio has reduced the quantity of lower grade SP-10 product in its blend, with lump and fines shipments of the discount product dropping 42% and 53% YoY respectively and Pilbara Blend lump and fines sales up 18% and 34% YoY.

Production up outside aluminium

Stausholm noted Rio raised production across most of its divisions in 2022 after a tough operational year in 2021.

“A number of operational records were achieved in the second half across the Pilbara iron ore mine and rail system. Deployment of our Safe Production System resulted in improved performance at those sites and overall production was higher versus 2021 across all commodities, with the exception of aluminium and alumina,” he said.

“The acquisition of Turquoise Hill Resources strengthens our copper portfolio and demonstrates our ability to allocate capital with discipline to grow in materials the world needs for the energy transition and delivering longterm value for our shareholders.

“Copper guidance has been increased accordingly. We continue to invest in future growth, progressing the Rincon lithium project in Argentina and are working with our partners to progress the Simandou project in Guinea.

“We continue to work hard to transform our culture and invest in genuine partnerships. I am proud that we have reached new agreements with the Yindjibarndi and Puutu Kunti Kurrama and Pinikura peoples in Australia, and the Pekuakamiulnuatsh First Nation in Canada.”

Rio saw mined copper output rise 6% to 521,000t in 2022, though was down 1% to 131,000t for the December quarter, while titanium dioxide slag production was up 42% in the quarter to 323,000t and 18% in the year to 1.2Mt after the end of unrest at its Richards Bay Minerals operation in South Africa.

Its high grade iron ore division, the Iron Ore Company of Canada, saw production lift 6% on 2021 levels to 10.3Mt (+1% to 2.5Mt for the quarter), with bauxite production up slightly by 1% to 54.6Mt (13.2Mt Q4) and aluminium down 4% to 3.009Mt (+3% to 783,000t Q4).

Updates on major projects was muted, with discussions with traditional owners at the delayed Winu copper-gold project ongoing, as well as negotiations with its partners at the Simandou project after the December signing of a non-binding term sheet between Rio’s Simfer JV, Baowu, Winning Consortium and the Guinean Government on co-development principles for the development of port and rail infrastructure.

Rio spent US$56m and US$189m progressing the projects respectively.

It also tipped US$250m into exploration and US$161m into its new Battery Materials division, where it is progressing the development of a 3000tpa starter lithium carbonate plant at its Rincon Lithium Project in Argentina’s Salta Province.

Rio stands out as a believer in the hot modern day commodity where few other majors, including main rival BHP (ASX:BHP), have dared to tread.

Despite the Serbian Government’s refusal to permit the development of its controversial Jadar mine last year, Rio remains committed both to Jadar and the lithium thematic, telling analysts last year it expects demand to rise 4 to 7 times by 2030.