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Polar vortex lowers Iron Ore Company of Canada first quarter production

MONTREAL - Rio Tinto says its global iron ore production reached a record for the first quarter as strong output in Australia more than offset weakness at the Iron Ore Company of Canada, which was hampered by extreme cold that swept North America.

The global mining giant said Tuesday that its share of IOC production was 1.8 million tonnes, down 12 per cent from the prior year and 24 per cent from 2.3 million tonnes produced in the fourth quarter.

Pellet sales were 14 per cent higher than the prior year while concentrate sales fell 33 per cent as a result of the unusually cold weather. Rio owns 57.8 per cent of IOC.

Rio Tinto's (NYSE:RIO) global ore production with partners reached 66.4 million tonnes in the quarter, with its share being 52.3 million tonnes. Shipments increased 16 per cent to 66.7 million tonnes despite a tropical cyclone that closed its Australian port for three days in December and heavy rainfall in January and February that had an impact on its mine, rail and port operations.

"Rio Tinto has started the year with a series of performance records as we continue to drive productivity gains across our operations," CEO Sam Walsh said as the operational results were released as the miner held its annual meeting in Australia.

Record first-quarter ore production and shipments in Australia were driven by productivity improvements and the continued ramp up towards 290 million tonnes of annual production in the first half of this year. However, both were down from the fourth quarter.

The London and Australian-based miner said its share of aluminum production was 832,000 tonnes, unchanged from the prior year but down two per cent from the fourth quarter.

The quarter-over-quarter decline was due to the late November shutdown of a Rio Tinto Alcan smelter in Shawinigan, Que., and partial curtailment of production at the Boyne smelter in Australia last summer due to high electricity prices. These were partially offset by production from its new AP60 plant in Quebec which reached full production in December.

Rio Tinto expects its global aluminum production will reach 3.4 million tonnes this year.

The miner's share of production at the Diavik diamond mine in the Northwest Territories was 1.1 million carats in the first quarter, down four per cent from the prior year and down 10 per cent from the fourth quarter.

Although 17 per cent more ore was processed at Diavik in the quarter, the amount of diamonds recovered was lower because it came from a lower-grade section.

Meanwhile, titanium dioxide production was nine per cent lower in the first quarter reflecting softer market demand.

The company said the planned rebuild of one of nine furnaces at Rio Tinto Iron and Titanium operations in Quebec continued to be postponed until market conditions improve for high-grade titanium dioxide, a white pigment used in paints, coatings, plastics, papers, inks, foods, medicines and toothpaste.

Analyst Jackie Przybylowski of Desjardins Capital Markets said the weather impact on IOC's production was greater than she expected, but will be short term.

"We continue to expect that IOC will improve production in 2014 as (an) expansion project improves mill productivity," she wrote in a report that forecast total production would increase 14 per cent this year to about 17.6 million tonnes.

Peter Mallin-Jones of Canaccord Genuity said iron ore and aluminum production were in line with estimates while iron shipments were slightly more than anticipated.

"Overall we continue to believe Rio Tinto shares offer attractive returns on investment and strong growth in EBITDA and dividends over the next few years," he wrote in a report.

Follow @RossMarowits on Twitter.

The Canadian Press


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