Rio Tinto appears set to beat its own iron ore production targets for 2017 in a sign that hopes the proposed joint venture between Fortescue and Vale could reduce the oversupply in the global market will be short-lived.
Rio is not going to step back from the iron ore producers’ fight, and Samarco, BHP’s troubled Brazilian joint venture with Vale, is aiming to restart by the end of 2016 at 60 per cent capacity despite many observers expecting it to be mothballed for at least two to three years, or shut.
As well, the latest figures out of Port Hedland suggest that Gina Rinehart’s Roy Hill mine could be accelerating shipments quicker than expected, three months after its first ore was shipped to Asia. Roy Hill will be rushing to spread fixed costs out across as big a production base as possible.
Rio Tinto has said in its guidance it will produce 350 million tonnes in the Pilbara in 2017, despite having infrastructure capacity of at least 360 million tonnes a year. But Deutsche Bank analyst Paul Young is convinced the mining giant will hit its ultimate Pilbara production target of 360 million tonnes by the end of 2017 using a “capital-light approach”.
“We think the conservative guidance is a function of three factors: underpromising, contingency for the possible commissioning issues with the AutoHaul [automated] rail project, and that it will be of no benefit to the market if the true internal target [of +360] is published,” Mr Young said.
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