Red-lining
1Q23 PRODUCTION
Need To Know
- Record 1Q iron ore production as price rises 8% in the quarter and costs steady
- Chinese steelmakers ramp capacity utilisation >90%, a seasonal record as economy recovers
- FY23 copper production guidance lowered on operational issues at Kennecott and Escondida
FY23 guidance is unchanged except for lower mined copper due to operational issues. The underground copper mine at Oyu Tolgoi in Mongolia is now contributing. A strong first quarter of iron production has coincided with a recovering Chinese economy.
Iron Ore. Chinese steelmakers have ramped up blast furnace capacity utilisation to over 90% supporting demand for imported iron ore. RIO’s record 1Q23 production was 11% higher than 1Q22 with shipments up 16%. Iron ore prices are climbing (average US$125/dmt Platts CFR 62% Fe index) as China’s 1Q23 imports were a record 309mt. Cash cost guidance is unchanged at US$21.0-22.5/t.
Copper. RIO has lowered its mined copper FY23 guidance to 590-640kt (was 650-710kt) due to a conveyor outage at Kennecott and some geotechnical issues at Escondida. Offsetting this to some extent is the underground production at Oyu Tolgoi which boosted production to 28kt of mined copper from 10.8kt in 4Q22. RIO continues to work on its other copper projects (Resolution Copper in Arizona, Winu copper-gold in WA and now including La Granja in Peru). C1 unit costs for copper are unchanged at US160-180c/lb.
All other production was in-line with market expectations.
Investment View
RIO has an ambition to double its annual copper output by the end of the decade through brownfield and greenfield projects. Its stakes in Escondida (30%) and Oyu Tolgoi (100%) are two of the largest copper projects in the world and it has options in others. RIO thinks the Oyu Tolgoi project could reach 500ktpa of copper production by around 2030 (with ~330kozpa gold) if everything goes to plan.
The improving Chinese economy is a comforting message given RIO’s heavy exposure to iron ore exports to China.
Figure 1: RIO 1Q23 PRODUCTION
Stock Overview
Share Price
Company Overview
Rio Tinto is a global mining company with operations in iron ore, copper, aluminium and minerals.
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