Rio Tinto 'making good progress' on financial goal

UPDATE: Multinational mining giant Rio Tinto has reaffirmed its push to cut costs, telling investors it was "making good progress" on reaching its goal of trying to save $5 billion by next year.

Its focus on tackling its bottom line came as it reported mixed results as part of its first quarter operations review of 2013.

The London-headquartered powerhouse has three operating coal mines in Central Queensland, Kestrel, Hail Creek and Clermont.

Both Kestrel and Hail Creek are mined primarily for coking or metal-making coal although Kestrel produces some thermal coal, used to produce electricity.

Its fourth Queensland project Blair Athol was mothballed late last year.

Rio released the results of its first quarter on Tuesday afternoon, showing hard coking coal production - sourced from Hail Creek and Kestrel - was 10% lower than at the beginning of 2012.

When the first three months of 2013 were lined up against the final months of 2012, it was 16% lower.

Clermont's thermal coal production fell by about 20% when compared to the end of 2012, but when compared to the early months of 2012, it jumped by a huge 80% as it climbed from 629,000 tonnes to 1.1 million tonnes in 2013.

Speculation was rife earlier this month when the Wall Street Journal reported that Deutsche Bank was working with Rio Tinto to sell its Clermont and Blair Athol mines.

Neither Deutsche Bank nor Rio Tinto would discuss the rumours.

 

EARLIER: Each were hit hard when powerful weather events buffeted the Queensland coastline - now mining giants Rio Tinto and BHP Billiton will tell investors what that meant for business.

Rio will release its quarterly production results on Tuesday afternoon, with BHP Billiton to follow suit on Wednesday.

BHP has eight mines in the Bowen Basin west of Mackay including Goonyella Riverside, Broadmeadow, Peak Downs, Saraji, Crinum and Blackwater plus South Walker Creek and Poitrel.

Rio has three including Kestrel, Hail Creek and Clermont.

Analysts Deutsche Bank (DB) and UBS have disagreed on what Rio might deliver, with UBS predicting a modest drop to Rio's coal exports of about 4% for the first quarter of 2013 when compared to the final three months of 2012.

DB on the other hand, expects it to be closer to 13%.

Both blame the decline in exports on bad weather which left much of its Central Queensland rail network out of action throughout February.

When compared to the first quarter of 2012, both UBS and DB suggest Rio will have increased its exports by either 1.3 and 2.1.million tonnes.

DB also suggested production at BHP's metallurgical or steel-making coal mines fell by about 7% with sales falling 14% in the first three months of this year compared to late 2012.

Its energy coal division - used to create electricity - is expected to have grown by 3%.

DB is predicting BHP's results to show a growth in each of its Australian coal markets - steel-making coal exports, sales and energy coal - when compared to the first months of 2012.

It has been a trying time for both companies as they rush to adapt to harsher market conditions through widespread cost-cutting.

Lower prices for coal, though starting to recover, has also prompted speculation Rio Tinto was trying to offload its Clermont and now-mothballed Blair Athol energy coal mines in Central Queensland.

In 2012, falling prices and high costs forced BHP to put its Norwich Park and Gregory coal mines on hiatus.
BHP also warned new investment in the Bowen Basin was unlikely until conditions improved.

The coal industry in Queensland is believed to have shed 6000 workers in the past 15 months.


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