In a production update, the Anglo-Australian company said it has shipped a record 90m tonnes of the steel-making ingredient during the three months to December, up from 85.8m tonnes in the previous quarter.
As a result, the company will meet its goal of exporting 330m tonnes from its mines in the Pilbara region of western Australia in 2017, something that had looked in doubt for much of the year because of poor weather and problems with its rail system.
Rio also revealed its had received an average price of almost $65 a a tonne for its iron ore in 2017, a result that will fuel expectations of further cash returns to shareholders.
“The business performed well in the fourth quarter, and we finished the year in line with guidance across all major products,” said Rio’s chief executive Jean-Sébastien Jacque. “We shipped 90m tonnes of iron ore from our world-class Pilbara assets, a record quarter which demonstrates the system’s growing flexibility.”
Rio also said its Oyu Tolgoi copper operation in Mongolia had been hit with a $155m tax demand, which it was assessing.
The company said the record fourth quarter performance of its Australian iron ore business reflected “ongoing productivity improvements” to its rail network, which links its mines to export terminals and ports on the coast.
In a bid to improve the efficiency of its 1,700km rail system – the biggest privately owned and operated network in the country – Rio is introducing a fleet of autonomous trains, a project that is scheduled to be completed by the end of 2018.
“The automation of the Pilbara train system continues to make strong progress with greater than 60 per cent of all train kilometres now completed in autonomous mode with a driver on board for supervision,” the company said.
Monday’s update also showed Rio had produced almost 150,000 tonnes of copper in the final three months of 2017, up 23 per cent from the previous quarter. Production and shipment guidance for 2018 was unchanged from the estimates provided at a recent investor day.
The strong end to the year will fuel expectations that Rio will shower shareholders with more cash when it files annual results early next month. Last year, the company returned 40 per cent of all the cash it generated to shareholders. That equated to more than $6bn.
Iron ore is currently trading at $76.50 a tonne, supported by Chinese steel mills looking to buy high quality Australian material to boost the output of their blast furnaces. At that level, Rio and rival BHP Billiton will be making fat margins on every tonne they produce. At the recent investor day, Rio said it was producing iron ore at a cash cost of $13.80 a tonne.
Shares in Rio have climbed 20 per cent over the past six months to a seven-year high above £40. Strong global growth has created the strongest backdrop for commodity prices since the financial crisis and investors are returning to the mining sector.