Source - Strategic Research Institute
voda 14 feb 2015 om 16:06
0
Rio Tinto update on production of aluminium
Performance;
The Aluminium group's underlying earnings of AUD 1,248 million increased 124% in 2014, with EBITDA margins improving to 29% for integrated operations. The main drivers of this strong performance were continued momentum from cost reduction and productivity improvement initiatives, a further rise in regional market and product premiums and the beneficial impact of weaker Australian and Canadian currencies.
The Aluminium group's focused efforts on cost savings have now delivered pre tax cash cost improvements of AUD 806 million in 2014 and 2013 compared with the 2012 base. The combination of improved EBITDA and reduced working capital levels also delivered strong operating cash flow in 2014, which increased 50% to AUD 2,550 million and generated positive free cash flow.
In December 2014, Rio Tinto's aluminium group set out a new strategy focused around cash generation from its first quartile smelters and market-paced growth from its industry leading bauxite position. While the alumina division remains essential to provide the group's modern, low cost smelters with competitive security of supply, the focus in 2015 will be on driving productivity improvements and lowering costs to maximise value from these assets. Ramping up the Yarwun refinery to its 3.4 million tonnes per annum nameplate capacity during the second half of 2015 will be a critical component of this goal.
Markets;
The 2014 cash LME aluminium price averaged AUD 1,867 per tonne, an increase of 1% on 2013. Regional market premiums for aluminium reached record levels in the latter part of the year and are expected to remain strong in the near term. With growing demand and tight physical markets, LME inventories have begun to decline. Much of the remaining inventory continues to be tied up in financing deals due to higher forward prices and low interest rates.
Value added products represented 62% of primary metal produced in 2014, generating attractive product premiums. Overall, the group achieved an average realised aluminium price of AUD 2,395 per tonne in 2014 compared with AUD 2,249 per tonne in 2013.
Bauxite prices remain strong, underpinned by growing demand and the ongoing Indonesian bauxite export ban. Third party bauxite sales increased four per cent during 2014 to 23.3 million tonnes (2013: 22.4 million tonnes).
Operations;
Bauxite underlying earnings increased by 14% to AUD 429 million in 2014 boosted by a rise in third party sales and stronger pricing. The Weipa mine in Australia delivered another strong performance, comparable to that achieved in 2013 and the Sangaredi mine in Guinea achieved record production. Gove shifted to bauxite exports following the curtailment of the refinery in May 2014. Exports from Gove are currently infrastructure constrained at around 6 million tonnes per annum but are expected to ramp up towards an eight million tonnes per annum run rate towards the end of 2015, as these constraints are addressed. As a result, 2014 global bauxite production was marginally lower than 2013.
The alumina division recorded a loss of AUD 209 million, which represented a 21 per cent improvement on 2013, attributable to volume gains and cost improvements. Alumina production was up by 6% compared with 2013 reflecting stronger production across all refineries, in particular Yarwun which continued to ramp up. As a result of productivity improvements three of the four refineries achieved production records in 2014.
Primary Metal increased earnings by 215 per cent to AUD 629 million while earnings from the Pacific Aluminium smelters rose by 131 per cent to AUD 291 million. All regions benefited from the record product and market premiums and continued to realise significant benefits from their cost saving programmes.
Aluminium production was broadly in line with 2013, with production from the new AP60 plant and capacity creep across the smelter portfolio offsetting the closure of Shawinigan in November 2013 and the partial shutdown at Kitimat in preparation for the commissioning of the modernised smelter. Eight smelters, representing 54% of 2014 production volumes, achieved annual production records.
Further actions were taken in 2014 to streamline the portfolio, with the completion of the sales of the Aluminium group's interests in the SØRAL smelter in Norway in October and the Alucam smelter in Cameroon in December.
New projects and growth options;
The Kitimat Modernisation Project is proceeding in line with revised plan with first production expected towards the end of the first half of 2015 and full capacity of 420,000 tonnes expected to be reached in the first half of 2016.
Aligned to the Aluminium group's bauxite growth strategy, the South of Embley project, a 22.8 Mt per annum, tier one investment opportunity in Cape York, Queensland, with mining costs expected to be in the first quartile, continues under evaluation. Required regulatory permits are in place and the project is in an advanced stage of study.
2015 production guidance;
Rio Tinto's share of bauxite, alumina and aluminium production for 2015 is expected to be 43 million tonnes, 8.0 million tonnes and 3.3 million tonnes, respectively.
Source - Strategic research Institute