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Rio Tinto share price: where next as all Richard Bay mining halted

We examine why Rio Tinto has today curtailed its Zulti South, Richard Bay Minerals operation as well as the impact this is expected to have on FY19 production estimates.

Rio Tinto (ASX: RIO) has today announced that it would reduce its Richard Bay Minerals (RBM) operations due to escalating violence against company employees.

All mining operations have been stopped, and smelters are 'operating at a reduced level,' said the company. Ultimately, today's announcement is likely to have little impact on the broad share price outlook for RIO – though it is expected to impact the mining giant’s previously estimated titanium dioxide slag full-year FY19 production.

The company pointed out violence has recently escalated at the communities surrounding Rio Tinto's Richard Bay Minerals site, with an RMB employee being shot and seriously injured as a result.

Rio Tinto finalised a $343 million investment in the Zulti South project at Richard Bay Minerals earlier this year, with the large-cap miner currently holding a 74% stake in the growth project. 'Construction of the Zulti South project has also been temporarily paused.'

Though the site remains in the early-stages of its life-cycle, the company expects first production to hit in late 2021.

The company previously noted that 'the investment will be self-funded from RBM's cash flows, with no additional debt or recourse to Rio Tinto.'

Speaking of the ongoing situation, Bold Baatar, Rio Tinto's Chief Executive of Energy & Minerals said:

'The Saftey of our people is Rio Tinto's key priority and we have taken decisive action to stop operations to reduce the risk of serious harm to our team members.'

Bold Baatar further elaborated that:

'We are in discussion with the local communities, regional and national governments, and the police in order to find a way to address the Saftey and security issues. Our goal is to return RBM to normal operations in a safe and sustainable way.'

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Rio Tinto share price: where next following RBM halt

Rio Tinto’s (ASX: RIO) share price fell steeply today – dropping 2.7% – to $94.40 per share by the late afternoon. This volatile price action however was likely not attributable to today's media release, but likely related to broader market weakness that has seen the ASX 200 drop around 3.8% in the last two trading sessions.

The share prices of mainstay Australian mining giants FMG and BHP also fell today.

As a further result of this, the blue-chip miner noted that:

'Titanium dioxide slag production for 2019 is now expected to be at the bottom end of 2019 guidance of between 1.2 and 1.4 million tonnes.'

For reference and represented under ‘energy & minerals’ on RIO’s latest round of financial results, the miner produced 599 million tonnes of titanium dioxide during the first-half of 2019 – a 14% uptick on the year prior.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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