Rio Tinto's annual bauxite production reaches record high rising 9% YoY in 2016

Rio Tinto announced full year financial results for 2016 today. Operating cash flow generation reached US$8.5 billion and underlying earnings totalled US$5.1 billion (+12% year-on-year) for the entire tenure ended December 31, 2016. The balance sheet strengthened further with net debt reducing at US$9.6 billion, down 30% YoY.

Rio Tinto posted volume gain in bauxite from increased production at all four mines. Gross revenue from bauxite for the year ended December 31, stood at US$1,913 million while EBITDA was estimated at US$848 million, both down from the figures posted in 2015. The company attributed the decline in revenue to the low bauxite prices which did not match the increase in production. Plus, Chinese import price fell moderately to just under $50 per tonne as new supply from Guinea, Australia and Brazil replaced volumes lost to Malaysia’s export ban.

The metal and mineral development company invested in three major mining projects in 2016, one being bauxite. Amrun bauxite project in Queensland, announced on 27 November 2015 for $1.9 billion, remains on track, with production and shipping expected to commence in the first half of 2019, increasing bauxite exports by around 10 million tonne per annum, reports Rio Tinto into its annual financial disclosure.

Rio Tinto's annual bauxite production increased nine per cent to reach 47,703 tonnes in 2016, up from 43,677 tonnes in 2015. Annual production records were set at several sites, including Weipa and Gove for bauxite mining with both operations benefiting from increased plant throughput through productivity initiatives. The strong production performance and healthy demand from China enabled the group to increase its share of third party bauxite shipments by 10% to 29.3 million tonnes (against 26.6 million tonnes of 2015). Bauxite prices, however, decreased during the year in line with the weaker aluminium market environment.

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Nevertheless, higher production volumes These higher volumes, together with a continued focus on cash cost reductions, absorbed 74% of the bauxite price decline and led to a 50% FOB EBITDA margin for the bauxite business in 2016, broadly unchanged from 2015. Bauxite underlying earnings declined nine per cent to $493 million in 2016.

Rio Tinto's gross sales revenues for bauxite in 2016 decreased seven per cent to $1,913 million and included freight revenues of $202 million (against $205 million in 2015).