Rio Tinto share price on watch after stronger than expected iron ore shipments

Man in yellow hard hat looks through binoculars as man in white hard hat stands behind him and points.

Man in yellow hard hat looks through binoculars as man in white hard hat stands behind him and points.

The Rio Tinto Limited (ASX: RIO) share price will be on watch this morning.

This follows the release of the mining giant’s second-quarter production update.

What did Rio Tinto report?

For the three months ended 30 June, Rio Tinto reported iron ore shipments of 79.9Mt. This was up 5% over the prior corresponding period and 12% quarter on quarter.

The good news for the Rio Tinto share price is that this was ahead of expectations. For example, Goldman Sachs was expecting quarterly iron ore shipments of 78.7Mt and the consensus estimate was for 79.3Mt.

This took Rio Tinto’s first-half iron shipments to 151.4Mt, which is down 2% over the prior corresponding period. This was driven by skilled labour supply constraints, COVID-19 disruptions, first quarter delays of mine replacement projects, and significantly higher than average rainfall in May.

What else?

Rio Tinto also reported a 4% quarter on quarter increase in bauxite production to 14.1Mt, a 1% lift in mined copper production to 126kt, and a 1% decline in aluminium production to 731kt.

This is a mixed result compared to Goldman’s forecast of 13.8Mt, 137kt, and 755kt, respectively.

Guidance

Despite warning that it is currently experiencing elevated levels of unplanned absences at its Pilbara operations due to COVID-19 case spikes in Western Australia, the mining giant has left its FY 2022 iron ore shipments guidance unchanged at 320Mt to 335Mt.

It has also left its bauxite production guidance unchanged at 54Mt to 57Mt and its copper production guidance unchanged at 500kt to 575kt.

However, it has been forced to downgrade its alumina production range to 7.6Mt to 7.8Mt (from 8Mt to 8.4Mt) and aluminium production by 0.1Mt to 3Mt to 3.1Mt.

Positively, the company’s Pilbara iron ore 2022 unit cost guidance of US$19.5 to US$21 per tonne remains unchanged. As does its copper C1 unit cost guidance of 130-150 US cents/lb.

Though, it has warned that higher rates of inflation have increased its closure liabilities and impacted its underlying earnings. In the first half, this resulted in increased charges of approximately US$400 million pre-tax within underlying earnings compared with the first half of 2021, including a US$300 million increase in amortisation of discount, with the remainder impacting underlying EBITDA.

Management commentary

Rio Tinto’s chief executive, Jakob Stausholm, appeared pleased with the quarter. He commented:

We strengthened our operational performance at a number of sites, which we will now replicate across the portfolio.

We made progress against our four objectives during the first half and we are determined to further strengthen Rio Tinto while investing to grow in the commodities needed for the energy transition, decarbonise our portfolio, be a partner and employer of choice, maintain our tight capital allocation and continue to pay attractive dividends.

The post Rio Tinto share price on watch after stronger than expected iron ore shipments appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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