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Rio Tinto posts first-ever full-year loss

Keywords: Tags  Rio Tinto, copper, iron ore, aluminum, alumina, bauxite, earnings report, Sam Walsh Pilbara

SINGAPORE — Global miner Rio Tinto Plc posted its first-ever full-year loss in 2012 after taking a $14.4-billion impairment charge related to its aluminum business and its coal assets in Mozambique.

"We are deeply disappointed by the $14.36-billion write-downs that we have taken in 2012, primarily in our aluminum and energy businesses, which led to the group recording a net loss of $2.99 billion," chairman Jan du Plessis said in a statement Feb. 14. In contrast, the miner posted net income of $5.83 billion in 2011.

Rio Tinto’s consolidated sales revenue fell to $50.97 billion in 2012, down 15.8 percent from $60.54 billion in 2011, and its net debt more than doubled to $19.3 billion.

The company was hurt by lower average market prices for commodities only partly offset by higher volumes.

"In 2012, we generated strong margins in copper, iron ore and minerals, reflecting our industry-leading positions in each sector," chief executive officer Sam Walsh said.

Rio Tinto’s iron ore business, which Walsh led until January, generated earnings of $9.25 billion in 2012, down 30.3 percent from $13.27 billion the previous year. Earnings by its aluminum segment plunged to just $3 million from $442 million in 2011, copper earnings fell 43.5 percent to $1.09 billion from $1.93 billion and energy segment earnings tumbled 73.6 percent to $283 million from $1.07 billion.

In response, the company plans to slash costs by more than $5 billion by the end of 2014 and cut capital expenditures on approved and sustaining projects to about $13 billion in 2013. In addition, Walsh said the company hopes to garner "significant cash proceeds" by selling its noncore assets, such as the company’s Pacific Aluminium and diamond businesses, which have been on the block for more than a year.

"We are optimizing our future capital allocation by prioritizing and investing in only the highest-returning projects," he said. "Our major capital projects in copper and iron ore continue in line with expectations and are poised to deliver additional volumes this year."

Walsh said he expects "the positive momentum in the fourth quarter" of 2012 to carry over into 2013, in part because he sees Chinese gross domestic product growth once again rising above 8 percent. However, he noted that market uncertainty and price volatility likely would persist "as long as the structural issues in Europe and the United States remain unresolved."

Rio Tinto announced that the phase-one expansion of its Pilbara iron ore project in Australia has been accelerated and is now slated for completion in the third quarter of 2013, with the phase-two expansion to 360 million tonnes per year expected to be operational by the first half of 2015.

In addition, commissioning of the Oyu Tolgoi copper-gold mine in Mongolia is underway, with first commercial production scheduled before the end of June 2013, the company said.

Rio Tinto said it expects to produce about 265 million tonnes of iron ore from its global operations in Australia and Canada in 2013, while Montreal-based Rio Tinto Alcan Inc. expects to produce 34 million tonnes of bauxite, 8.2 million tonnes of alumina and 2.5 million tonnes of aluminum, excluding Pacific Aluminium and other aluminum assets the company has marked for divestment or closure.

A version of this article was first published by AMM sister publication Metal Bulletin.

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