SYDNEY (Reuters) - Global miner Rio Tinto (RIO.AX)(RIO.L) boosted its forecast copper output for 2013 after a better-than-expected recovery at its landslide-hit U.S. Kennecott mine, and posted record iron ore and coal output in the third quarter.
Copper production was also buoyed by a ramp-up at the Oyu Tolgoi mine in Mongolia, while Rio said in its third-quarter production report it was on track to beat a target of cutting $750 million (469 million pounds) in exploration spending this year.
Mining companies worldwide are under pressure to reduce costs and drive existing assets harder as demand for raw materials levels off after years of high growth, particularly from China.
“Copper’s come in well ahead of most people’s expectations, and there’s a pretty chunky production guidance upgrade there,” said Chris Drew, an analyst at RBC Capital Markets.
Shares in Rio extended gains after the report, rising 2.5 percent in Australian trade to a near three-week high and outperforming the broader index .
In Australia, Rio Tinto said productivity improvements led to record quarterly iron ore and thermal coal production and shipments in the third quarter.
Rio Tinto counts on iron ore for more than two-thirds of its revenue.
Iron ore shipments, which rose 11 percent from the previous quarter, were boosted by a planned expansion to take annualised output to 290 million tonnes.
The work was on track to be completed by the end of the first half of 2014, ahead of time and under budget, Rio said, but left its full-year guidance for iron ore unchanged at 265 million tonnes.
Despite an expected slowdown in demand growth from China, Rio Tinto is expanding ports and rail lines in Western Australia to cope with output of 360 million tonnes, which would make it the world’s biggest iron ore miner ahead of Brazil’s Vale (VALE5.SA).
A board decision is expected by early December, with Rio Tinto -- like rivals Vale and BHP Billiton (BHP.AX)(BLT.L) -- counting on economies of scale to keep costs well below those of smaller competitors.
“We maintained good progress against our strategic priorities to improve the performance of our businesses, strengthen the balance sheet and deliver our approved growth projects,” Chief Executive Sam Walsh said in the report.
Rio Tinto said it expects the Kennecott mine in Utah, struck by a severe landslide six months ago, to yield 185,000 tonnes of copper in 2013, up from a July forecast of 150,000 tonnes, due to progress on building a new road to help in waste removal and remediation work.
An avalanche of dirt buried the northeast section of the open-pit mine on April 10. Rio Tinto initially said it expected production at Kennecott to drop by at least 50 percent in 2013.
Third quarter output of mined copper rose 23 percent on a year ago, with Rio Tinto exporting copper from Mongolia to bonded warehouses in China.
Overall, the company upped its 2013 guidance for mined copper by 4.4 percent to 590,000 tonnes and refined copper by 17 percent to 270,000 tonnes.
“Rio is currently trading on around 11 times next year’s consensus earnings numbers,” said Peter Esho, chief market analyst at Invast.
“There is large scope for upside in these earnings estimates, which have already factored in some turnaround, but not the full extent that this report card suggests,” he said.
Additional reporting by Sonali Paul; Editing by Richard Pullin