Today's ActionFor those wondering what the hell is going on here, Rio Tinto released weak production results....
From TD...
Metals & Minerals Labrador Iron Ore Royalty Corp. (LIF-T) C$40.41 2022
Production Off to a Slow Start at IOC Craig Hutchison, P. Eng Nicholas Clarke, CFA (Associate)
Last night, Rio Tinto released its quarterly production results, which include the operating performance from Iron Ore Company of Canada's (IOC) Carol Lake mine. As a reminder, IOC is majority controlled by Rio Tinto (58.7%), with LIF owning a 15.1% equity interest and 7% gross-overriding royalty I
mpact: SLIGHTLY NEGATIVE
IOC reported Q1/22 consolidated production of 4.09Mt (100% basis) down 4% q/q, including 2.46Mt of pellets and 1.64Mt of concentrates. Production came in below our estimate of 4.45Mt (-8%), including 2.50Mt of pellets and 1.95Mt of concentrates.
Total iron ore shipments for the quarter were 3.43Mt versus our estimate of 4.45Mt (-23%), with the shortfall driven by lower concentrate sales. No colour was provided with respect to the lower sales volumes; however, we note that freight logistics have been an industry-wide issue over the last several months.
2022 production guidance unchanged at 17.0-18.7Mt (concentrate and pellets). We are currently forecasting 2022 full-year production of 18.0Mt, consisting of 10.0Mt of pellets and 8.0Mt of concentrate.
Iron ore prices remain resilient — High-grade iron ore prices (65% Fe Index) averaged a robust US$170/t in Q1/22, despite lower steel output in China, which saw production cutbacks in the face of winter pollution curbs, particularly during the Olympic Games in February, along with renewed COVID-19 lockdowns. Chinese steel output for the first three months of 2022 fell 10.5% y/y.
Iron ore pricing has been supported by supply disruptions stemming from the war in Ukraine. Russia and Ukraine collectively account for ~4% of global iron exports and ~23% of global pellet exports. With most, if not all, of Ukrainian pellet production offline and Russia subject to sanctions, pellet prices are seeing upward pressure. Blast furnace (BF) pellet premiums averaged US$67/t in Q1/22 (above the 62%-Fe benchmark). The BF pellet premium has now increased to US $82/t in April.