Rio Tinto Iron Ore Mines Hurt by Cyclone Flooding
Date: 07-Mar-06
Country: AUSTRALIA
"We have declared force majeure and are assessing the situation," a Rio Tinto spokesman told Reuters.
Mining had slowed at the Hamersley and Robe River mines in far western Australia's Pilbara region, although rail and port activities were unaffected, the spokesman said.
Rival miner in the Pilbara, BHP Billiton Ltd./Plc said its mining and shipping operations were unaffected by the recent flooding, which included three cyclones ripping off the Indian Ocean into the region this year.
Rio's declaration of force majeure, made on March 2, could result in the company missing or delaying shipments to its steel mill customers or require differing grades of ore to be shipped, the spokesman said.
"We've got nine mines across the Pilbara, most of them have water in some of the pits and its a question of assessing what the impact is on us," the spokesman said.
The potential for delays follows moves by Rio Tinto to boost output - up 13 percent in the last quarter - to catch strong demand from steelmakers across Asia.
Iron ore mining is a high-cost business where hundreds of millions of tonnes of ore must be dug up and sent to distant ports for shipment to the giant steelmaking mills of Europe, Japan, Korea, Taiwan and, increasingly, China.
The mining companies managed a whopping 71.5 percent price hike last year for iron ore, which fattened the bottom line for Rio Tinto.
Each 1 percent rise in iron ore prices adds about $14 million to Rio Tinto's net profit.
However, China's growing influence on how much steel mills will pay mining companies for iron ore could limit price hikes this year to as little as 5 percent, according to sector analysts.
Force majeure allows a company to legally miss contracted deliveries due to circumstances beyond its control.
Rio Tinto's Australia-listed shares ended 0.71 percent up at A$70.85, in a broader market up 0.1 percent.
(US$=A$1.35)
