| Will Rio Tinto’s Growth Projects Lower Diamonds & Minerals Costs? | |
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How Will Rio Tinto Adjust to China’s 'New Normal'? (Continued from Prior Part) Diamonds & Minerals costs
As we’ve discussed in the previous part of this series, the demand for diamonds, uranium, and titanium dioxide feedstock is weak, leading to pressure on prices. To offset the impact of lower prices, operators in these products, including Rio Tinto (RIO), Dominion Diamond Corporation (DDC), BHP Billiton (BHP)(BLT), Cameco (CCJ), and Anglogold Ashanti (AU), are continuing to cut down costs. In this article, we’ll see how RIO is pushing ahead with its cost-cutting efforts.
BHP and RIO form 6.7% of the SPDR S&P Natural Resources ETF (GNR).
Weaker demand is weighing on costs too
- Weaker prices across most of RIO’s products lowered underlying earnings by 7% year-over-year to $75 million.
- RIO’s decision to align titanium feedstock’s production with market demand negatively affected its unit cash costs.
Improving productivity
- RIO is relying on improving productivity and reliability in this division to weather the current weak price environment. These initiatives include system and process optimization, working capital optimization, and consistent and controlled operating procedures.
- RIO has also reduced head counts significantly since the end of 2012.
- The company is also pursuing a focused capital program with options to grow with high-value projects, which should help grow volumes along with lowering costs. These projects include:
- Zulti South for titanium dioxide—investment decision expected in mid-2016
- Bunder for diamonds
- Jadar for lithium and borates
- Titanium dioxide project in Mozambique
- A potash project in Canada
Management also believes that cost and productivity initiatives will enhance RIO’s structural position as demand returns and grows.
Continue to Next Part Browse this series on Market Realist:
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Companhia Vale Do Rio Doce
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PRODUCER |
CODE : RIO |
ISIN : US7672041008 |
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ProfileMarket IndicatorsVALUE : Projects & res.Press releasesAnnual reportRISK : Asset profileContact Cpy |
Vale do Rio is a copper producing company based in . Vale do Rio produces copper, aluminum, bauxite, iron, manganese, nickel and silica in Brazil, develops coal and copper in Australia and in Brazil, and holds various exploration projects in Brazil and in Peru. Its main assets in production are ALUNORTE, URUCUM MINE, MILTONIA 3, MORRO DA MINA, TAQUARI - VASSOURAS, SOSSEGO MINE, CAPAO XAVIER, CARAJAS, ANDRADE, SAMARCO, CONCEIÇÃO, MINAS DO MIEO, AGUA LIMPIA / CURURU, GONGO SOCO, BRUCUTU, BAU, FABRICA NOVA, FAZENDAO, TIMBOPEDA, CORREGO DO FEIJAO, SEGREDO/JOAO PEREIRA, PICO/SAPECADO/GALINHEIRO, VARGEM GRANDE COMPLEX TAMANDUA, CAPITAO DO MATO, ABOBORAS, PARAOPEBA COMPLEX JANGADA, SERRA NORTE - N4W, SERRA NORTE - N4E, SERRA NORTE - N5-W, SERRA NORTE - N5E, SERRA NORTE - N5E-N, SERRA NORTE - N5S, SERRA LESTE, MILTONIA 5 and MRN (BAUXITE MINING) in Brazil, its main assets in development are BELVEDERE in Australia and SALOBO PROJECT in Brazil and its main exploration properties are SALOBO, MAR AZUL MINE, ONÇA PUMA, PROJECT 118 and VERMELHO in Brazil and CORDILLERA DE LAS MINAS in Peru. |