Floods Hit Rio Tinto's Coal Production

SYDNEY, Australia—Rio Tinto PLC's hard coking-coal production fell 6% in the fourth quarter of 2010 as record rainfall and flooding in the Bowen Basin of Australia's Queensland state hit output, the company said Tuesday.

But the company's share of iron ore output rose 6% on the year to 50.1 million tons in the fourth quarter from 47.2 million tons in 2009 as the world's second-largest iron-ore producer prepared for a 50% increase in its production capacity from Australia's Pilbara region, Rio Tinto said in a full-year production report.

While coal fell short of the company's previous forecasts, full-year iron-ore production outstripped a previous estimate of 179 million tons, coming in at 184.6 million tons, a 9% rise on the year.

Global miners saw booming prices for their products in 2010, with iron-ore, copper, gold, silver, platinum and tin hitting records as demand rebounded.

Chief Executive Tom Albanese said the company's performance could be measured by its quarterly and annual production records for iron ore in the fourth quarter and 2010 as a whole.

"Running our operations at full capacity was a priority for Rio Tinto in 2010, in an environment of strong prices for most of our commodities," he said.

However, adverse weather over the Australian wet season threatens some of the major producing regions for the world's number-three listed miner. Above-average cyclone activity is expected in the Pilbara region in Western Australia over the next few months and Rio Tinto's Boyne aluminum smelter and four Bowen Basin mines have declared force majeure in recent weeks because of rainfall and flooding in Queensland.

The Bowen Basin produces nearly two-thirds of the world's hard coking coal, an essential ingredient in steelmaking, and some analysts predict prices of the commodity to double to as high as US$500/ton as a result of the supply disruption from the rainfall. Rio Tinto is the first of the Bowen Basin's major miners to announce its production for the last months of 2010.

It said hard coking coal production for the full year increased by 20% to 9.0 million tons from 7.5 million tons, while semi-soft coking coal production rose 7% to 3.1 million tons from 2.9 million tons over the same period.

Australian thermal coal, which is mined in both the Bowen and the Hunter Valley region further south on Australia's east coast, rose 3% in the fourth quarter to 5.2 million tons from 5.0 million tons, but slipped 9% in the year to 18.4 million tons from 20.2 million tons.

In the U.S., thermal coal production collapsed to 42.3 million tons last year from 83.0 million tons in 2009.

In Rio Tinto's third-quarter production report in October, the company guided its Australian hard coking coal production at 9.5 million tons, semi-soft coking coal at 3.3 million tons, and thermal coal at 19.1 million tons. Its full-year share of iron ore production was tipped at 179 million tons, mined copper at 660,000 tons, alumina at 9.4 million tons and aluminum at 3.8 million tons.

Rio Tinto is the world's second-biggest producer of aluminum and iron ore, the biggest producer of uranium and a top-five producer of coking coal and copper.

Fourth-quarter mined copper production fell 9% on year to 185,200 tons from 203,300 in spite of booming prices for the commodity, with full-year production down 16% to 679,100 tons from 804,700 tons in 2009.

Rio Tinto has respective stakes in Chile's Escondida and Indonesia's Grasberg copper mines, the world's two largest, of 30% and 40% respectively. The company said ore grades had declined at both mines over the course of the year, hitting output.

Aluminum production was flat on year at 962 million tons against 957 million tons in the fourth quarter of 2009, and alumina was also flat at 2.3 million tons in the fourth quarter. Alumina is an intermediate commodity in the production of aluminum from bauxite ore.

Uranium production from Rio Tinto's Ranger and Rossing mines, the world's second- and third-largest, dropped 3% to 3.3 million pounds from 3.4 million pounds in the fourth quarter and fell 20% on the year to 11.4 million pounds from 14.1 million pounds.

（END） Dow Jones Newswires