Rio Tinto, that announced today big changes to face the drop in iron ore prices, has a less diversified portfolio than Anglo American, specialising in iron ore; around 87pc of its underlying earnings came from the metal last year. Anglo American also announced this Tuesday big changes in company plans and investments.
Rio Tinto has a reputation for tight cost management and technological innovation – it is proud of its “mine of the future” concept, which encompasses the use of driverless trucks and big data to squeeze the most out of its facilities.
But even it cannot predict the future. Ten months ago, when iron ore was trading at around $63 a tonne, its boss Sam Walsh suggested that the idea of it hitting $30 was “fantasy land”.
Well, on Tuesday, iron ore dropped to $38.65, edging firmly into territory that would see margins all but disappear for the majors. It was trading at $152 a tonne in February 2013.
For the time being, Rio Tinto will continue to turn out iron ore, though like Anglo, it is cutting back capital expenditure.
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