Rio hits record iron ore production

Rio Tinto (RIO) released its second quarter operations review showing sizeable y/y increases in production and shipments of iron ore, as well as material increases in copper, aluminium, thermal coal and titanium dioxide production.

If you've been up to the Pilbara in recent times, you'll already know what a spectacular sight the operations up there represent. From the ASX release:

"-Record first half iron ore production, shipments and rail volumes despite a conveyor belt 
breakage resulting in one of five ship loaders being side-lined for almost three weeks and 
unseasonal wet weather which led to flooding in the Pilbara. 

-Expansion of Pilbara capacity to 290 million tonnes per year remains on budget and on time to 
deliver first tonnes by the end of the third quarter of this year. Delivery of first tonnes will be 
followed by a steady commissioning and ramp-up period. Completion of the Rail Capacity 
Expansion infrastructure project was the most recent milestone reached in the quarter."

Some have pointed out that this is not all beneficial to Australia as our major resources companies are 100% not Australian-owned.

This is true: Rio has a very complex group structure being a dual-listed group with a maze of subsidiaries, and ownership is spread widely around the world - as indeed are its ~70,000 global employees.

A glance at Rio's segmental reporting disclosures in its most recent annual report shows that a large chunk of the group's gross revenue is from iron ore production, with a sizeable percentage being shipped to China.

The Australian-based employees will benefit from the group's massive wealth (the group has a global market capitalisation of well over $100 billion) and of course Australia will benefit from mineral royalties, which is good news for the state of WA.

Such major projects also create employment and revenues for mining services companies, so the increasing levels of production can have a knock-on effect.

And this, naturally, is what Australia wants to happen through the second phase of its mining boom.

Meanwhile, Rio will hope that the iron ore price stays as high as it is today at above US $125/tonne.

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