Global mining giant Rio Tinto last week said global iron ore production reached a record 271 million tonnes in 2009, up 13% from 172 million tonnes in 2008. In the fourth quarter of 2009, Rio said its global iron ore production was up 49% on the fourth quarter of 2008.
"This was another very strong quarter for iron ore production, driven by continuing demand from China," chief executive Tom Albanese said and our analyst agrees.
"It's a very strong result, particularly in iron ore," Morningstar senior equities analyst Mark Taylor said. "It's stronger than what we were expecting."
Morningstar recently completed its six monthly commodity price review, the key from which from Rio's perspective are higher copper and iron ore price forecasts, Taylor said: "Long-term iron ore prices rise 26% to $50/tonne and copper prices 25% to $2.50/lb."
"Iron ore, copper and coking coal are three leading ingredients for developing world growth via urbanisation led by China" Taylor added. Morningstar has increased its valuation and earnings forecasts for Rio substantially following the fourth quarter results and its own commodity price review.
"Our preference remains for the diversified resource majors for metals and bulks exposure," he said. "We think BHP Billiton remains the clear winner from a business quality perspective, but Rio outshines from a valuation perspective."
Regarding its proposed iron ore production joint venture with BHP, Rio last week said it expects completion of the production joint venture in the second half of calendar year 2010.
During 2009, Rio announced asset sales totalling $7.2 billion, of which $3.6 billion were completed in 2009. Since February 2008, Rio has announced agreed asset sales of $10.3 billion.
"In the Pilbara we achieved record sales for both the quarter and the full year and both global and Pilbara production set new records in 2009," CEO Tom Albanese said. “We are seeing recovery across most of our key commodities, although we continue to be cautious on the state of the global economy going into 2010 as stimulus packages start to wind down."
Rio said Pilbara iron ore production was 56 million tonnes in the fourth quarter of 2008, up 54% on the same quarter in the previous year, and consistently operated above its nameplate capacity in order to supply continuing strong growth in demand.
Among other commodities, the diversified miner said mined copper production was up 36% year-on-year in the fourth quarter of 2009, while refined copper production was up 15%. For the full year, mined gold production exceeded 1.1 million ounces, up 141% on 2008.
Production cutbacks were maintained in the aluminium group in response to market conditions. Bauxite production was down 1%, alumina down 2% and aluminium down 3%, compared with the fourth quarter of 2008.
Australian thermal coal production was up 5% on the fourth quarter of 2008, while Australian hard coking coal production was down 2%. Rio said uranium production was down 20% on the fourth quarter of 2008 due to lower grades at its subsidiary ERA. For 2009, full-year uranium production was consistent with the prior year.
