Rio Tinto share price falls on Q4 update

The Rio Tinto Ltd (ASX: RIO) share price will be on watch on Tuesday.

This follows the release of the mining giant’s fourth quarter and full year update this morning.

Rio Tinto share price lower despite achieving iron ore guidance

For the three months ended 31 December, Rio Tinto ended the financial year positive with solid production growth across its key iron ore operations.

The company’s Pilbara iron ore business delivered production of 89.5Mt for the quarter, which was up 6% year over year and quarter on quarter. This underpinned iron ore shipments of 87.3Mt for the period, which equates to an increase of 4% year over year and 5% since the third quarter.

Management advised that this reflects performance improvements continuing across the system and a record second half performance across the mine and rail system.

For the full year, this led to Rio Tinto reporting iron ore shipments of 322Mt, which was at the low end of its guidance range of 320Mt to 335Mt.

Also achieving guidance for the full year was its aluminium, bauxite, copper, diamonds, iron ore pellets, and titanium dioxide slag production. In fact, only Rio Tinto’s alumina production fell narrowly short of guidance for FY 2023.

Unfortunately, as many were likely to be expecting, Rio Tinto hasn’t been able to avoid inflationary pressures. It advised that its FY 2022 Pilbara iron ore unit cash costs are likely to end up slightly above the top end of its US$19.5-US$21.0 per tonne guidance range. This is primarily due to inflation, diesel prices, and labour costs.

Though, with Rio Tinto commanding US$99 a tonne for its iron ore during the quarter, this led to the mining giant averaging a price of US$97.6 per wet metric tonne for the 12 months. As a result, it is still generating material free cash flow from these operations despite missing its cost guidance.

Management commentary

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

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.

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.

Stausholm also spoke about the company’s growth projects, including its expansion into lithium. He adds:

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.

In line with our new purpose of finding better ways to provide the materials the world needs, we will continue to progress our four objectives and strategy to strengthen the business, which will lead to profitable growth and continue to deliver attractive shareholder returns.

FY 2023 guidance

All of Rio Tinto’s FY 2023 guidance remains unchanged, except for mined copper. The latter has increased to reflect the increased ownership in Oyu Tolgoi from 33% to 66%.

The company is guiding to:

• Iron ore shipments of 320Mt to 335Mt
• Alumina production of 7.7Mt to 8Mt
• Aluminium production of 3.1Mt to 3.3Mt
• Bauxite production of 54Mt to 57Mt
• Mined copper production of 650kt to 710kt

The post Rio Tinto share price falls on Q4 update 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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