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Rio Tinto’s 1Q15 Aluminum Production Is Weak, Guidance Maintained

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Aluminum production

Rio Tinto’s (RIO) aluminum production in 1Q15 was in line with 1Q14. This is despite a partial shutdown at Kitimat, which continues for first hot metal at the modernized smelter by mid-2015. Here is a summary of 1Q15 production results for Rio’s aluminum operations.

  • Bauxite: Bauxite production set a new first-quarter record. It was 4% higher than 1Q14. This was mainly due to the strong performance at Weipa, which continues to ramp up. Gove mine production has reached a run-rate of 7 million tons per annum (or Mtpa) and is gearing up to reach 8 Mtpa by 4Q15. This can happen as Rio continues to address its infrastructure constraints.
  • Alumina: The curtailment of the Gove refinery was completed in May 2014. It remains on care and maintenance. Excluding the Gove refinery, alumina production was 2% higher year-over-year in 1Q15.
  • Aluminum: Rio’s aluminum production in 1Q15 was in line with 1Q14 at 809 thousand tons. The restarted capacity at the Boyne smelter in Australia offset lower production from Kitimat.
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Rio reiterates guidance

As previously announced, Rio Tinto’s share of production remains unchanged and is expected to be 43 million tons of bauxite, 8 million tons of alumina, and 3.3 million tons of aluminum.

Earnings for Rio’s peers

Alcoa (AA) reported its 1Q15 earnings on April 8. It reported net income of $195 million on revenues of $5.8 billion. The results were broadly in line with market expectations. Kaiser Aluminum (KALU) is expected to release its 1Q15 earnings on April 28, and Century Aluminum’s (CENX) earnings are expected on April 30. CENX currently forms 2.5% of the SPDR S&P Metals and Mining ETF (XME). Reliance Steel and Aluminum (RS) makes up ~4% of XME.

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