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Miner Rio Tinto posts best profit since 2011 helped by iron ore prices

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MELBOURNE/BENGALURU: Rio Tinto warned on Wednesday that the coronavirus outbreak may create challenging conditions in the next six months, building on disruptions to global supply chains and potential delays to projects in Australia.


The miner’s warning comes on the heels of its best underlying earnings since 2011, buttressed by a sizable jump in iron ore prices last year.


However, 2020 looks uncertain with economic activity stalling in many parts of China as it grapples to contain the spread of the virus that has killed more than 2,700 people and affected two dozen countries.


“Today our iron ore books are full. But we are likely to see some short-term impact such as on supply chains and possibly in provisional


services from Chinese suppliers,”


Chief Executive Jean-Sébastien Jacques told reporters in a teleconference.


Jacques said Rio was currently assessing the potential for delays to its projects from Chinese equipment suppliers and would inform the market of any impacts “in coming weeks.”


“There could be (an impact) on all projects across the industry because lots of fabrication now is coming from China.”


Rio Tinto is building its $2.6 billion Koodaideri iron ore mine, and was also planning to start construction in the first half of 2020 for mining new deposits at its Tom Price mine.


The coronavirus outbreak, while detrimental to short-term demand, may see Beijing unleash further measures to boost spending on steel-intensive sectors such as construction and infrastructure.


“The Chinese government has many possible stimulus measures at its disposal. And we expect them to act,” Jacques added.


Just last week, the world’s biggest miner, BHP Group flagged a hit to demand if the fallout extended beyond March.


Rio Tinto is the last of the Australian iron ore giants to report, and like the others it posted a lighter dividend than investors were expecting, which analysts said was to keep a buffer given risks to the global economy.


The concerns raised by iron ore miners comes amid high prices for the steelmaking commodity following supply disruption in Brazil and robust Chinese demand.


Rio, the world’s top iron ore producer, said underlying earnings for the full year ended December 31 climbed 18 per cent to $10.37 billion. It was slightly under a consensus estimate of $10.40 billion by 17 analysts compiled by research firm Vuma Financial.


China’s iron ore imports were at their second-highest level in 2019, fuelled by strong demand at steel mills. Prices in Shanghai closed up by a quarter last year. — Reuters


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