Anglo-Australian miner Rio
Tintos Fer et Titane (RTFT) division is placing its South
African Richard Bay Minerals (RBM) zircon and rutile processing
operations on care and maintenance, and taking its Quebec
chloride slag production facility offline.
The move comes in response to
weak demand and to reduce operating costs, the company
The announcement, made in a
blink-and-youll-miss-it paragraph of the companys
47-page 2012 annual report, forms part of new CEO Sam
Walshs $5bn cost-cutting exercise, outlined during a
The market for both titanium
dioxide (TiO2) and zircon started the year strongly,
with prices high, demand robust and the outlook positive,
the company explained.
From July major players
announced downgraded sales expectations as demand weakened.
Inventory levels throughout titanium dioxide and zircon supply
chains increased and remain very high, it continued.
Price levels for TiO2
and feedstock minerals have certainly waned over the last 12
months. Many producing companies have submitted bearish results
in this sector, including paint producers such as DuPont.
The announcement follows on from
news that RTFT halted its TiO2 feedstock expansion
programme (TiO4), made at African Mining conference Indaba, in
Rio Tinto purchased BHP
Billitons portion of RBM for $1.7bn, late last year,
bringing its stake up to 74%, and invested $135m in a new
tailings treatment plant. It is also investigating the Zulti
South deposit to continue operations at RBM when current
resources are exhausted, which comprises the wholly owned
Quebec Iron & Titanium (QIT) in Quebec, Canada, and the
interest in RBM in KwaZulu-Natal, South Africa.
The annual results which post Rio
Tintos biggest ever loss, at $3bn, but highlighted
earnings of $9bn follow on from the companys operations
Walsh said during the results
presentation that under his leadership, the company would
have an unrelenting focus on pursuing greater value for
The statement will surely strike a
chord with the shareholders given that Walsh replaces Tom
Albanese, who stepped down in January 2013 following a series
of poor decisions made by the company, which eventually cost it
a $14bn writedown.
In the latest round, Walsh outlined
that the company would invest (...) capital only in
assets that, after prudent assessment, offer attractive returns
that are well above our cost of capital.
I intend to strengthen the
existing management systems, bringing greater rigour to
internal challenge and debate, greater clarity and
accountability to decision making, and clearer line of sight to
the critical business issues that exist across the
organisation, he added.
Im asking every
employee to run the business as if they own it, he
Commenting on the $3bn loss and the
writedowns, chairman Jan du Plessis said that these
writedowns are deeply disappointing. In particular the
substantial impairment of our Mozambique coal business is
unacceptable. There clearly is a need for greater discipline,
in particular in the way we manage capital in Rio
Walsh underlined his commitment to
bringing value to shareholders and outlined how the company
intended to reduce costs.
We will unlock productivity
improvements and aggressively reduce our costs, he
CFO Guy Elliott echoed this
sentiment, saying that across the whole group, the company is
targeting a $5bn cumulative reduction in operating cash costs
by the end of 2014.
The largest saving will be in
energy (34%) across the group, followed by aluminium (30%),
copper (17%), central (9%) and finally diamonds and minerals
Walsh said that the company
expected the positive momentum in the fourth quarter of
last year to be sustained into 2013 with Chinese GDP growth
returning to above 8% in 2013.
We expect market uncertainty
and price volatility to persist as long as the structural
issues in Europe and the US are unresolved, he added.
In 2013, the company expects
production to be 1.7m tonnes for titanium dioxide
(TiO2) feedstocks, up 100,000 tonnes on 2012 levels.
Output from the borates arm is expected to reach 0.5m tonnes of
boric oxide equivalent, upÊ 40,000 tonnes from 2012
The company produced 11% more
TiO2 feedstock in 2012 year on year, at a rate of
1.6m tonnes. Borates output was at 463,000 tonnes in 2012,
compared to 504,000 tonnes in 2011, a decrease of 8%. Salt
production was up 3%, at 6.8m tonnes.
Rio Tinto reported that prices
declined from 2011 highs across nearly all of its commodities,
except in its industrial minerals, which posted higher
Despite this, it posted an EBITDA*
of $215m for the Rio Tinto Minerals division across the year,
compared to $239m the previous year and earnings of $140m,
compared to $144m the previous year.
Dampier Salt posted an EBITDA of
$23m, flat year-on-year, but posted a loss of $4m over 2012.
Last year the company posted a $1m loss.
For its RTFT division, the company
posted an $774m EBITDA, up from $345m in 2011. It posted
earnings of $397m, up from $151m the previous year.
The group benefited from
higher prices for titanium dioxide feedstocks and borates and
the increase in ownership of Richards Bay Minerals, the
The company posted earnings of
$9.3bn. Capital expenditure was at $17.4bn, up 42%
Rio Tinto Minerals posted an EBITDA
of $103m for its diamonds division, down from $180m last year.
Net earnings - the company posted a $43m loss - in 2011 it
recorded earnings of $10m. Revenue was at $741m, up from
Capex was at $680m, up from $445m,
operating assets at $1.3bn, up from $1.17bn.
Diamond production production was
up 12%, 13.12m carats, up from 11.7m in 2011.
* Earnings before interest, taxes, depreciation, and