Rio Tinto, the mining and resources giant, has managed to beat market expectations on earnings but admits price pressures are a problem.
Underlying earnings for the first six months of the year were $5.2bn against a consensus forecast of $4.9bn. The figure is still 34% down on 2011, reflecting a drop in prices for almost all the substances that Rio Tinto mines, except gold.
The drop in prices, in particular for iron ore, reduced earnings by $1.936bn, while volume declines, caused by reduced demand, contributed $584m to the decline.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Rio Tinto says cost control is a priority but it has faced difficulties in maintaining efficiencies as volumes, and the quality of ore at some of its mines, have declined. The effect of these costs was $388m compared to the same period of 2012.
The firm's Chief Executive Tom Albanese said: "We continue to generate strong margins despite falling prices, reflecting the low cost nature of our businesses."
Albanese added he expected to see a pickup in Chinese economic activity by the end of the year as government stimulus measures begin to filter through to new infrastructure projects.
In a separate statement, the group said that its Blair Athol coal mine in Australia, near Clermont in Central Queensland, will finish mining operations this year after nearly 30 years of production.
Clermont Region general manager operations Dawid Pretorius said the mine has been progressively scaling back production in a transition towards closure since 2010 and will be closed before December. "After close to three decades, Blair Athol Mine's coal seams are largely mined out and the time has come to finish production," he said.
The mine, which currently has 170 employees and contractors, will only need 30 roles after production finishes.
-
FTSE 100 hits record highs – why is it rising and will we see more gains?Advice UK equities have been described as unloved for a long time but as the FTSE 100 hits new highs, we explain if now is the time to buy British.
-
How to invest in copperIt may be time to invest in copper as the red metal appears poised for a big jump. Dominic Frisby looks at what should investors should buy
