Commodities

Rio Tinto flags higher capex, says Australian aluminium assets unsustainable

Credit: REUTERS/JASON REED

Rio Tinto on Thursday flagged higher sustaining capital costs as it replaces aged infrastructure and ramps up iron ore production, and also raised questions over the future of its Australian aluminium business.

Adds detail, executive comments

MELBOURNE, Oct 31 (Reuters) - Rio Tinto RIO.AX on Thursday flagged higher sustaining capital costs as it replaces aged infrastructure and ramps up iron ore production, and also raised questions over the future of its Australian aluminium business.

Rio said in a statement ahead of an investor briefing that it had deferred $500 million of capital expenditure in 2019 to the next year.

It also flagged higher sustaining capital expenditure of $1-$1.5 billion each year from 2020, versus earlier guidance of around $1 billion.

This is partly as it looks to replace and refit aged infrastructure, head of iron ore Chris Salisbury told reporters on a conference call ahead of the briefing.

The global miner said total capital expenditure in 2019 is expected to be at around $5.5 billion, and $7 billion in 2020.

It also forecast a rise in iron ore shipments for 2020 of up to 5% subject to market conditions.

On its Australian aluminium assets, Rio said the current power situation was not sustainable as prices were too high.

"The smelters do lag internationally competitive prices which undermines the viability of the asset," head of aluminium Alf Barrios said on the same call.

He said Rio was speaking with power providers and the government. "I'm not going to speculate on the outcome but clearly the current situation is not sustainable."

(Reporting by Melanie Burton; Editing by Himani Sarkar)

((melanie.burton@thomsonreuters.com Twitter: @MelanieMetals; +613 9286 1421; Reuters Messaging: melanie.burton.thomsonreuters.com@reuters.net))

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