Overall, Rio reported a record net earnings figure of $US6.9 billion for the first half of 2008, up 113% on the result for the previous corresponding period, on the back of half-year production records achieved for seven commodities.
The mining heavyweight, the subject of a $149 billion takeover bid by BHP Billiton, also posted a 55% increase in underlying earnings from $3.5 billion in the first half of 2007 to $5.5 billion in first half of 2008 while underlying earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 73% to $11.4 billion.
While rail, sea and energy costs increased in Australian coal, higher prices more than offset the impact with earnings of $401 million, $224 million above the first half of 2007.
Hard coking coal production in Queensland recovered significantly from flooding in the first half, while soft coking coal production in New South Wales’ Hunter Valley increased to take advantage of stronger pricing.
In Australian developments, Rio announced cost inflation and a stronger Australian dollar had forced it to increase its estimated capital investment in the Clermont coal project to $1.29 billion, adding the project was on schedule.
In the US, earnings from coal operations were $65 million, $19 million above the 2007 first half.
Rio said improved prices and volumes helped compensate for higher energy and repairs and maintenance costs.
Increased production from the successful ramp-up of the overland conveyor at Jacobs Ranch was offset by the effects of rail delays, following severe flooding of the railway tracks in the Midwest.
Rio continues to pursue the divestment of its US coal assets, announcing earlier this month it was assessing floating Cloud Peak Energy – which holds most of its US coal mines.
Rio Tinto chief executive Tom Albanese said in a statement that the result showed the unprecedented demand for minerals and metals which is expected to continue.
“In this environment, the importance of having long-life reserves and resources is critical, and Rio Tinto is particularly advantaged in this regard,” he said.
“When demand and prices are strong, growth options become increasingly valuable, and we have these in abundance.”
Shares in Rio closed yesterday $A1.76 higher at $A124.06.
