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Rio delays rail automation, cuts iron ore guidance

Rio Tinto train - Photo Rio Tinto

Mining giant Rio Tinto is experiencing delays in its automated rail scheme in the Pilbara, and has cut into its iron ore export guidance as a result.

Part of Rio’s Mine of the Future program, AutoHaul is an initiative to create a fully-autonomous heavy haul, long distance railway system to move hundreds of millions of tonnes of iron ore from mine to port in the Pilbara region of Western Australia.

Rio fitted trains with AutoHaul for testing throughout 2015. The miner has said 2016 will see the system reach full functionality, so it can be put through the regulatory approvals process prior to official integration into operations.

But the AutoHaul rollout has been delayed, the miner announced on Tuesday.

“Testing and verification of AutoHaul is continuing, with over 75,000 kilometres of mainline trials competed,” Rio said, “however, some delays are being experienced.”

The miner didn’t go into specifics, but said the delays would impact production in 2017.

Rio updated its Pilbara iron ore guidance to be between 330 and 340 million tonnes in 2017, down from 350 million tonnes.

It did not adjust its global outlook for 2016, of 350 million tonnes of iron ore production on a 100% ownership basis.

This forecast was based on a solid first quarter, where the miner exported 80.8 million tonnes of iron ore from its operations in the Pilbara and Canada, up 17% compared to the first quarter of 2015.

Elsewhere, aluminium production was up 10% year-on-year to 887,000 tonnes in the quarter, and bauxite was up 13% to 11.01 million tonnes.

Chief executive Sam Walsh said the result demonstrated the miner’s commitment to operational excellence.

“However, we continue to experience volatility in commodity prices across all markets,” he conceded.

“In the face of a testing external environment, our focus remains on delivering further cost and productivity improvements, disciplined capital management and maximising free cash flow, to ensure that Rio Tinto remains strong.”

Rio’s iron ore outlook cut for 2017 comes a week after rival Fortescue Metals Group said it was running ahead of schedule for iron ore exports in the 2015/16 financial year, thanks to kind conditions for exports at Port Hedland during the March quarter.

FMG exported 42 million tonnes of iron ore in the March quarter 2016, up 4% year-on-year.

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