Yarwun's record year not enough to boost Rio Tinto's profits
A BOOST in production at Rio Tinto Yarwun has helped the mining giant rally against low commodity prices last year.
But the record-breaking production at the Yarwun site wasn't enough to boost the aluminium sectors profits during a "volatile" year.
In its annual financial report, Rio Tinto detailed low commodity prices as one of its biggest challenges in 2016.
It said they were able to offset some of the financial impacts by cost-cutting and driving up production, including at the Yarwun refinery.
The Rio Tinto Alcan Yarwun alumina refinery achieved record production, up 5%.
In the whole aluminium sector 8,192,000 tonnes was produced.
This, on top of $500 million reduced cash costs, meant the mining giant was able to achieve cash flow positive results at the Yarwun refinery and Rio Tinto's other aluminium assets.
Part of that has been contributed by Yarwun workers, who are encouraged to tell management about their cost-saving measures and ideas.
But the report, released this week, shows the volatile changes in the aluminium price hurt their annual profits.
The increase in production wasn't enough to boost profits in the aluminium sector.
The aluminium group's underlying earnings of $947 million was 15% less than 2015.
Rio Tinto chief executive J-S Jacques said the volatile commodity prices influenced every one of their sectors last year.
"This uncertainty could have an impact on growth, trade, currencies and subsequently our industry fundamentals," Mr Jacques said.
"I firmly believe our industry is underpinned by free trade and a level playing field. Political transitions are occurring around the world, with more elections to come in 2017."
For the year the average aluminium price was $1849 per tonne, down 3% from $2058 per tonne in 2015. A significant drop in the market "premia" for aluminium also gave the multi-national company another hurdle.
"The transformation of the Alumina business gathered momentum during 2016, and resulted in the Alumina business significantly reducing its cash costs and delivering positive EBITDA and free cash flow, despite the price increase," the report reads.
In 2017 Rio Tinto are hoping to produce 8-8.2 million tonnes of alumina and 3.5 - 3.7 million tonnes of aluminium.