Rio Tinto releases third quarter production results
16 October 2020
Rio Tinto Chief Executive J-S Jacques said “We have delivered a good operational performance across most of our assets catching up on planned maintenance activity, particularly in iron ore, and continuing to adapt to new operating conditions as we learn to live with COVID-19. We have maintained our capex guidance and our 2020 production guidance across our key products.
“We are focused on regaining the trust of the Puutu Kunti Kurrama and Pinikura people (PKKP) with a focus on remedy. On Tuesday 13 October we wrote a letter to Traditional Owners in the Pilbara detailing that we will review all heritage disturbance in consultation with them; and shared our intention to modernise our agreements which includes modifying clauses to ensure respect, transparency and mutual benefit.
“Rio Tinto has shown great resilience through challenging conditions and will continue to prioritise the health and safety of our employees, contractors and communities. The quality of our assets, coupled with our strong focus on capital discipline and value over volume approach, mean we can continue to invest in our business, support our communities, pay taxes and royalties to host governments and continue to generate superior returns to shareholders in the short, medium and long term.”
|
Production* |
|
Q3 |
vs Q3 |
vs Q2 |
9 MTHS |
vs 9 MTHS |
|||
|
Pilbara iron ore shipments (100% basis) |
Mt |
82.1 |
-5 |
% |
-5 |
% |
241.7 |
0 |
% |
|
Pilbara iron ore production (100% basis) |
Mt |
86.4 |
-1 |
% |
+4 |
% |
247.4 |
+2 |
% |
|
Bauxite |
Mt |
14.5 |
+5 |
% |
-1 |
% |
42.8 |
+7 |
% |
|
Aluminium |
kt |
797 |
+1 |
% |
+2 |
% |
2,365 |
-1 |
% |
|
Mined Copper |
kt |
129.6 |
-18 |
% |
-2 |
% |
395.4 |
-10 |
% |
|
Titanium dioxide slag |
kt |
293 |
-9 |
% |
+12 |
% |
848 |
-8 |
% |
|
IOC iron ore pellets and concentrate |
Mt |
2.3 |
-21 |
% |
-15 |
% |
7.7 |
-4 |
% |
*Rio Tinto share unless otherwise stated
Q3 Operational update
• Our All Injury Frequency Rate (AIFR) of 0.35 has improved through 2020 versus 2019 (0.42). We have successfully adapted our assets and offices to the new operating conditions associated with COVID-19 and we continue to closely manage this risk to protect our people and communities.
• Pilbara operations are returning to more normal operating conditions with rosters back to pre-COVID-19 settings although controls to protect our employees, contractors and communities remain in place. Total material moved was a record for the quarter with Pilbara iron ore production of 86.4 million tonnes (100% basis), 1% lower than the third quarter of 2019. A recovery in planned maintenance activity in the port led to 5% lower shipments.
• Bauxite production of 14.5 million tonnes, 5% higher than the third quarter of 2019, with increased year on year production across all sites, including record quarterly production at the non-managed CBG joint venture in Guinea.
• Aluminium production of 0.8 million tonnes in the third quarter was 1% higher than the third quarter of 2019 with stable operations across our smelter portfolio.
• Third quarter mined copper was 18% lower than the same period of 2019 due to lower grade at Kennecott as a result of pit sequencing to accommodate the extended smelter shutdown. Refined copper was 57% lower, primarily due to delays in restarting the Kennecott smelter.
• On 19 August, we announced an update to our refined copper guidance following delays to the restart of the smelter at Kennecott due to unexpected issues following planned maintenance. The safe start-up of the smelter has commenced and consistent with the announcement, we expect that it will be fully operational during October. 2020 guidance for refined copper remains at 135 to 175 thousand tonnes.
• On 28 August, we noted Turquoise Hill Resources' (TRQ) publication of its '2020 Oyu Tolgoi Technical Report' (2020 OTTR) in relation to the Oyu Tolgoi (OT) project in Mongolia. All estimates are subject to potential changes once the definitive estimate is complete, which is still expected later in 2020. Preliminary indications from the definitive estimate process are that first sustainable production is trending towards the earlier months of the October 2022 to June 2023 range. The estimated development capital cost remains within the range of $6.6 to $7.1 billion, and has now been updated to include known impacts of the COVID-19 pandemic. Further information can be found in the Investments, growth and development projects section below.
• On 10 September, we announced we had entered a Memorandum of Understanding (MOU) with TRQ, that provides a pathway to progress the financing for completion of the Oyu Tolgoi Underground Project in Mongolia and address TRQ's funding position.
• Titanium dioxide slag production of 293 thousand tonnes was 9% lower than the third quarter of 2019 due to COVID-19 restrictions in Quebec and South Africa and lower market demand.
• Production of pellets and concentrate at Iron Ore Company of Canada (IOC) was 21% lower than the same period of 2019 due to an annual maintenance shutdown deferred from June to September as a result of COVID-19 travel restrictions. A weather related power failure and mechanical issues also impacted production in the third quarter.
|
Cultural heritage
We have taken a number of actions to strengthen cultural heritage governance and controls, and commenced the longer term process of regaining the trust of Traditional Owners.
On 13 October we wrote a letter to Traditional Owners in the Pilbara detailing that we will review all heritage disturbance in consultation with them; and shared our intention to modernise our agreements which includes modifying clauses to ensure respect, transparency and mutual benefit. Specifically, our high level principles include: • Reassessing all activities which have the potential to impact heritage sites, with an immediate focus on those sites that could be impacted over the next 18 to 24 months. • Not enforcing any clauses that restrict Traditional Owners from raising concerns about cultural heritage matters with anyone, or any clauses that restrict Traditional Owners from applying for statutory protection of any cultural heritage sites. • Introducing mechanisms into our agreements to respond better to new information that may emerge about cultural heritage sites, including those affected by section 18 approvals. We will seek to agree an appropriate mechanism in our revised agreements so that there is a clear path for resolution of any differences of view that may emerge. • Improving transparency of any revised agreement and more impactful realisation of economic and social benefits.
Other actions include: • We continue active engagement with the PKKP and have agreed a meeting between the Rio Tinto board and the PKKP before the end of the year. • We have instituted an enhanced level of governance over the impact on sites of heritage significance. All approvals to disturb sites directly or indirectly are being made on a risk-managed basis at Rio Tinto Iron Ore Chief Executive level; referrals of decisions as appropriate will be directed to the recently established Heritage Sub-Committee of the Rio Tinto Executive Committee, and if necessary, to the Board. • We have established the Communities and Social Performance Area of Expertise, which is aligned with the existing Health, Safety, Environment (HSE) function, reporting to Mark Davies, Group Executive Safety, Technical and Projects and a member of the Executive Committee. • We have appointed a Chief Advisor – Indigenous Affairs who has a direct reporting line to the Chief Executive. • We have made a firm commitment to increase employment opportunities for Australian Indigenous Peoples in our business, and a $50 million investment to advance Indigenous leadership in our Australian business. • We continue to contribute to the reform of the Aboriginal Heritage Act 1972 (WA). We support an appeal right in the Western Australian government's section 18 review process to give a greater voice to Traditional Owners in the decision-making in relation to mining on their land.
Documents related to Juukan Gorge and additional information on our approach to communities and heritage can be found on our website : • On 4 August, we published our submission to the Parliamentary Inquiry on Juukan Gorge. • On 24 August, we published a Board review of cultural heritage management, detailing what elements of our systems, decision-making processes and governance failed to work, along with recommendations for change. • On 4 September, we provided additional information related to questions taken on notice following our appearance at the Joint Standing Committee on Northern Australia.
On 11 September, we announced changes to our Executive Committee following a period of extensive stakeholder engagement by the Board. By mutual agreement, J-S Jacques will step down from his role as an executive director and Chief Executive, Chris Salisbury will step down as Chief Executive, Iron Ore and Simone Niven will step down as Group Executive, Corporate Relations. |
|
Our markets
Global economic activity in the third quarter was generally strong, helping to sustain optimism for a widespread recovery in 2021. However, recent high-frequency data suggests that the rate of recovery in growth is slowing in most economies, with pent-up demand dissipating, and the rise of renewed lockdowns threatening recovery.
• Commodity demand in China has been supported by commodity-intensive stimulus measures.
• Chinese iron ore demand is at record levels against a backdrop of recovering seaborne supply that was disrupted earlier in the year. However, with the major producers expected to deliver strong volumes in the fourth quarter, iron ore inventories are expected to grow modestly as China's steel consumption eases from record highs and scrap consumption increases. Japan, South Korea, Taiwan and Europe continue to show signs of recovery: however, ex-China steel production remains down significantly year on year.
• The automotive sector is continuing to see recovery, supporting some demand for Value-Added aluminium products (VAP), but remains below pre-COVID-19 levels globally.
• Copper prices reached a two year high with strong Chinese consumption supporting cathode imports. COVID-19 related supply disruptions remain ~4% of annual copper supply, in addition to normal industry supply disruptions.
Product stewardship
• Our Kennecott operation in the US was the first producer globally to be awarded the 'Copper Mark' and Oyu Tolgoi in Mongolia subsequently qualified. The Copper Mark is the industry's new independently assessed responsible production programme.
• We have partnered with Anheuser-Busch InBev (AB InBev), the world's largest brewer, to deliver a new standard of sustainable aluminium cans. Initially focused in North America, the partnership will see AB InBev use our low-carbon aluminium made with renewable hydropower, along with recycled content, to produce a more sustainable beer can.
• At our Boron operation in California, a demonstration plant producing lithium carbonate from a waste stream was commissioned. Optimisation of the plant will continue ahead of potential expansion of the project to support commercial production.