RIO Rio Tinto Plc

SYDNEY--Rio Tinto PLC said its shipments of iron ore fell sharply during the first three months of this year, as the miner was buffeted by bad weather and exhausted stockpiles of ore at its remote Australian operations.

The miner also downgraded its expectations for iron ore production in 2017, citing delays to its new, autonomous railway system.

One of the world's biggest exporters of the steelmaking commodity, Rio Tinto has in recent years ratcheted up production from a vast network of mines in northwest Australia, betting on strong demand from expanding Asian economies such as China.

That growth stalled last quarter, however, as its operations faced challenges from a tropical cyclone that hit Western Australia in late January, the Anglo-Australian miner said Tuesday. Large stockpiles built up during an expansion of Rio Tinto's infrastructure network, which helped bolster sales last year, have also been drawn down.

The company reported global iron-ore shipments of 80.8 million metric tons for the three months through March, down 12% on the previous quarter.

The miner, which runs iron-ore operations in Canada as well as Australia, aims to produce 350 million tons of the commodity globally this year, up from 328 million tons in 2015. It cut its projection for output from its Australian mines for 2017 to between 330 million tons and 340 million tons, from 350 million tons earlier.

Analysts say disruptions to iron-ore supplies more widely in Australia and Brazil have helped shore up the price of the commodity, which rose by 24% over the course of the first quarter and should offset the impact of lower sales on Rio's earnings. Still, brokers are largely cautious on the outlook for the iron-ore market, citing expectations of a ballooning global glut.

On Monday, Citi forecast prices would fall below $40 a ton by the end of the year, from roughly $58 a ton now.

Rio Tinto's first-quarter shipments were 11% higher on year, after a multibillion-dollar expansion of its Australian iron-ore network. As recently as 2010, the miner was producing about 240 million tons a year. Other major global miners such as BHP Billiton Ltd. and Brazil's Vale SA have also increased production.

"We continue to experience volatility in commodity prices across all markets," said Rio Tinto Chief Executive Sam Walsh, who will retire in July.

The company abandoned a policy of stable-or-rising dividends after it slumped to a loss last year, weighed down by write downs against an iron-ore project in Guinea and uranium assets in Australia and Canada. In February, Moody's Investors Service lowered the miner's credit rating, saying the outlook for its markets, particularly iron ore, was deteriorating.

Rio Tinto has worked to counter weaker commodity prices by strictly controlling spending, including a global freeze on wages implemented earlier in the year. This month, it said it intended to lengthen payment terms with suppliers to free up more cash, but backtracked on that plan after criticism from contractors and politicians.

First-quarter production of other commodities was mixed, Rio Tinto said Tuesday. The miner produced 27% more copper on-quarter, aided by higher output from large mines such as Escondida in Chile, and 3% more aluminum, after upgrades to a smelter in British Columbia, Canada. Output of thermal coal and bauxite were lower.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

(END) Dow Jones Newswires

April 18, 2016 20:45 ET (00:45 GMT)

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