Rio’s Quarterly Iron Ore Output Rises to Record as Prices Jump

Rio Tinto Group, the third-largest mining company, said fourth-quarter iron ore output rose to a record, boosted by expansions in Australia as prices gained.

Production climbed to 50.1 million metric tons in the three months from 47.2 million tons in the same period a year earlier, according to a statement today from London-based Rio, the second-biggest exporter of the commodity. The figure beat a UBS AG estimate of 46.1 million tons.

“Iron ore was much better than what I was expecting,” said Tim Schroeders, who helps manage $1 billion at Pengana Capital Ltd. in Melbourne, including Rio shares. “Given they continue to raise the bar, expectations are pretty high.”

Rio Chief Executive Officer Tom Albanese, who is studying expanding iron ore operations by a further 50 percent by 2015 at a cost of about $14.8 billion, said today that demand is growing from steel mills. Prices may rise to a record $250 a ton this year, Credit Suisse Group AG said this month.

Rio rose 1.5 percent to 4,450 pence by the close of London trading. It earlier climbed 1.1 percent in Sydney to close at A$86.80. Rio has 29 “buy,” three “hold” and two “sell” recommendations among analyst ratings compiled by Bloomberg.

Full Capacity

“Running our operations at full capacity was a priority for Rio Tinto in 2010, in an environment of strong prices for most of our commodities,” Albanese said in the statement. The ore unit is the biggest earnings contributor for the company, which is estimated to report record annual profit next month.

Steel consumption may jump 5.3 percent this year to a record, according to forecasts from the World Steel Association. The spot price of ore shipped to China gained 21 percent in the quarter and 43 percent over 2010, according to The Steel Index.

The price rose 0.3 percent to $181.40 a ton today, the highest since April 27.

Rio’s production of hard coking coal, also used to make steel, fell 6 percent from the previous quarter because of heavy rainfall in December in Queensland, the company said. A so- called force majeure declaration for four mines remains in place and the company said it can’t estimate the full effect of the bad weather or when the declaration will be lifted.

Force majeure is a legal clause that allows a company to miss deliveries because of circumstances beyond its control.

Impact on Output

“It could take at least six weeks to get back to full speed and a lot has got to go right in terms of infrastructure access that is out of their control,” Pengana’s Schroeders said. Output may be down 30 percent in the current quarter on a year earlier, he said.

The floods may have cost the coal industry A$2.3 billion （$2.28 billion） in lost sales, the Queensland Resources Council said yesterday. About 15 percent of the state’s 57 coal mines are operating at full production, 60 percent have restrictions and 25 percent have yet to resume output, it said.

Rio’s mined copper production fell 9 percent to 185,200 tons in the quarter because of lower ore grades at the Kennecott Utah, Escondida and Grasberg mines, the company said. Alumina and aluminum output was little changed, while diamond production declined 28 percent because of lower grades at the Argyle mine. Uranium production fell 3 percent, the company said.

Rio may report full-year net income of $14.4 billion on Feb. 10, according to the average estimate of 12 analysts surveyed by Bloomberg. First-half profit tripled to $5.85 billion as sales of iron ore surged.