Posting fist half underlying earnings of $2.9 billion, 43% lower than the previous period a year ago, the falling iron ore price – and commodity prices in general – are hitting the miner.
Iron ore makes up 60% of Rio Tinto’s earnings. And despite prices coming off the boil, the miner’s Pilbara operations are still managing to recoup some of the largest margins in the industry.
This chart shows Rio Tinto is at the lower end of the iron ore cost curve. In the six months to June, Rio had a cash unit cost of $16.2 a tonne, 21% lower than the $20.4 a tonne in the first half of 2014. Rio had an average realised free on board price of $54.4 per wet metric tonne.
Earnings from iron ore were down 49% to $US4.09 billion. This was driven by the impact of lower prices, down 46% on average.
This chart shows its annual average margin for each tonne of iron ore is about 62%, compared to higher cost producers with tighter margins of around 35%.