Rio Tinto Releases its Fourth Quarter Report

Rio Tinto (RIO) has warned in the forth quarter report which was submitted on Thursday that its iron ore output will fall by 18% with a drop in demand from the Chinese steel mills. The company delivered its December-quarter operations report on Thursday. Rio Tinto, which is cutting costs and selling assets to pay debt, reported fourth-quarter iron ore output at 31.8 million tonnes, and sales down 23 percent to 33.6 million tonnes, just meeting its lowered target. Rio Tinto had revealed in November that it would cut its annual iron ore production rate by 10 percent, paring its annual shipments target to between 170 million and 175 million tonnes. Sales for all of 2008 came in at 171.4 million tonnes.

The drop in sales from its Western Australia iron ore mines, which more closely reflect Chinese demand, could play into the hands of Chinese and Japanese mills which are pressing for a 40 percent cut in contract prices. Last month, Rio Tinto announced plans to slash spending, cut 14,000 jobs and sell assets to help pay down $39 billion in debt. Reacting to the situation CEO of RIO has said that, “We are taking firm action in response to the global economic downturn and, given the resilience of Rio Tinto’s low-cost assets, expect to remain well positioned when recovery comes”.

Following up on its plan to cut capital spending by more than $5 billion this year, it announced this week it was shelving its Corumba iron ore expansion in Brazil, its Northparkes copper expansion in Australia, automation of iron ore trains and an underground mine project at its Argyle diamond mine in Australia. Rio has shelved a number of projects in the past week, including a gold and copper mining project and diamond mine in Australia and the expansion of its Corumba iron ore mine in Brazil. Rio Tinto's shares fell on Thursday by 9% to $36.91, but did not change much after the operations review was released.