Record iron ore production is expected to boost Rio Tinto PLC 's profits for 2011 even though the mining giant signalled Tuesday that its aluminum operations lost money in the second half of last year.
The Anglo-Australian miner said it produced a record 65 million tonnes of iron ore in the fourth quarter and 245 million tonnes for the year.
Storms in Australia earlier in the year caused shipments to dip to 239 million tonnes.
While aluminum production increased by 1 per cent last year, annual capacity was recently reduced by 462,000 tonnes because of a lockout that cut production by two-thirds in Alma, Que., and issues in Lynemouth, England, and Shawinigan, Que.
A circuit breaker failure at the Shawinigan smelter cut capacity in half to 50,000 tonnes.
Rio Tinto said its underlying aluminum earnings in the final six months of the year are expected to be “slightly worse than break even” because of market conditions and one-time costs, including $40-million in additional closing costs in Lynemouth.
The company's financial results will be released in February.
Chief executive officer Tom Albanese said iron ore production in Australia grew, adding that expansion plans continue to proceed.
“Across the group, production has bounced back from the severe weather conditions experienced in the first half, which had the biggest impact on Australian iron ore, coal and uranium,” he said.
Iron Ore Company of Canada production decreased by 8 per cent in the fourth quarter compared with the prior year and was 16 per cent lower than the third quarter.
Pellet production decreased by 35 per cent in the quarter and by 27 per cent for the year, while the output of concentrate for sinter production was increased in response to market demand.
Rio's diamond production was down in the quarter and off by 15 per cent for the year.
Output at the Argyle diamond mine in Australia fell while production at Canada’s Diavik mine, which is partially owned by the Harry Winston Diamond Corp., increased by 3.8 per cent for the quarter to 961,000 carats, while full-year production grew to more than four million carats.
Lower grades of copper mined reduced productions by 23 per cent for the year, in line with the company's guidance.
Damien Hackett of investment firm Canaccord Genuity said Rio’s forecast for aluminum losses are consistent with BHP Billiton’s operations, which are also expected to be close to break even for the last six months of the year.
“We think the difficult operating conditions for aluminum would have been expected by the market but perhaps not losses,” he wrote in a report.
Mr. Hackett said iron prices have recovered from late last year although Chinese growth rates have been lowered.
“Our view is for a soft landing in China's economy and, as such, we are of the view that Rio Tinto's shares remain a longer-term safe place in which to retain exposure to natural resources.”
Iron ore, which represents 65 per cent of Rio Tinto earnings, was 2.4 per cent higher than he forecast.
Rio Tinto recently approved an additional $2.7-billion (U.S.) capital investment to modernize its aluminum smelter in Kitimat, B.C. The $3.3-billion project to be completed in 2014 will increase production capacity by more than 48 per cent to about 420,000 tonnes per year.
The investment is part of the $15-billion of capital projects planned for 2012, including a substantial amount to increase iron ore production to 283 million tonnes by 2013.
The miner spent $5.5-billion to repurchase 91 million shares last year.
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