Rio Tinto Group has increased its full-year copper production guidance by 25,000 tonnes after making swifter-than-expected progress with the recovery program at its Bingham Canyon mine in the U.S. state of Utah.
A spectacular pit wall failure in April saw more than 150 million tonnes of rock and earth pour into the mine, the largest man-made excavation on earth, destroying an estimated $100-million (Australian or $92-million U.S.) of equipment.
At the time the U.K.-listed miner said the slide would result in as much as 125,000 tonnes in lost copper production in 2013. Copper is Rio’s second-largest profit earner, behind iron ore.
However, Rio said on Tuesday in its June quarter production report that it now expects production to fall by 100,000 tonnes because the initial recovery plan, which involves mining from lower sections of the pit and running down stockpiles, had “advanced faster than previously expected”.
Nomura analysts said: “We had expected a greater decline in output from Bingham Canyon as a result of the well-publicised pit wall failure in April”.
“The company appears to have recommenced mining from the lower part of the pit, and processed more stockpiled material than originally anticipated.”
Rio also used Tuesday’s update to reaffirm its 2013 global iron ore production guidance of 265m tonnes and said the expansion of its operations in the Pilbara region of Western Australia to annual production capacity of 290 million tonnes were on track and on budget.
“One of our key priorities this year is to deliver on our growth projects,” said Sam Walsh, Rio chief executive. Despite some challenging weather conditions, the Pilbara iron ore expansion is “on track to deliver first tonnes by the end of this quarter”.
Rio reported iron ore production from its flagship Pilbara operations of 62 million tonnes in the three months to the end of June, a 7 per cent increase on the previous quarter and a result that was in line with market forecasts.
Shipments, however, were lower at 56.4 million tonnes because of flooding and a major conveyor belt breakage at one of its two ship loaders at its port in Cape Lambert.
Iron ore is Rio’s most profitable business and is forecast to post earnings before interest of around $14.5-billion (U.S.) in the year to December.
Rio’s board is weighing plans to increase annual production in the Pilbara to 360 million tonnes a year by early 2015, which would make Rio the biggest iron ore producer in the world, overtaking Vale of Brazil. However, the plan will cost $5-billion to complete and has received a cool response from some major shareholders.
Acknowledging those concerns, Rio said on Tuesday that it was considering a number of options for the expansion including the development of new mines but also improving productivity at existing ones.
Big mining companies like Rio are under pressure to cut costs and spending on major projects because of volatile commodity prices and uncertainty over demand in key markets such as China, where economic growth slowed to 7.5 per cent in the second quarter.
On Tuesday, Glencore Xstrata PLC said it was suspending production at its small iron ore operation in Australia, citing falling revenue and increasing production and logistics costs.
Mr Walsh has pledged to strip out more than $5-billion of costs by the end of 2014 and sell non-core assets, including coal, aluminium and copper assets in Australia, in an effort to reduce Rio’s net debt, which has ballooned to more than $19-billion.
However, the company recently abandoned plans to sell its diamonds business because it could not secure a high enough price.
Rio’s U.K.-listed shares have fallen by more than 16 per cent since the start of the year and have underperformed the FTSE 100 by almost 30 per cent.