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= Rio Tinto Declares Force Majeure On Pilbara Iron Ore
(Comtex Business Via Thomson Dialog NewsEdge)By Stephen Bell
Of DOW JONES NEWSWIRES
PERTH, Mar 05, 2006 (Dow Jones Commodities News Select via Comtex) --Rio Tinto Plc.'s (RIO) Western Australian iron ore units have declared force majeure because of mine site flooding, a spokesman for the Anglo-Australian mining group told Dow Jones Newswires Sunday.
Rio Tinto is still calculating what impact the move caused by recent heavy cyclonic rains in the state's Pilbara region will have on shipment schedules and volumes, the spokesman said.
"It is a precautionary thing to do while we assess the extent of the issue," he said, adding that Hamersley Iron and Robe River Iron put the measure in place on Thursday evening.
Force majeure is declared by mining companies when they are at risk of not meeting contract terms because of circumstances beyond their control, or "acts of God".
"It is the end result of a lot of rain," the spokesman said, adding that the situation is "between us and our customers".
Rio Tinto is Australia's biggest iron ore exporter, just ahead of rival BHP Billiton (BHP). Both companies are enjoying buoyant prices for the steel-making ingredient because of a surge in demand from China.
Macquarie Equities said in a research note that Hamersley Iron and Robe River - the latter is a joint venture 53% owned by Rio - shipped 140 million metric tonnes of iron ore in calendar 2005.
Rio Tinto's move comes amid an already tight iron ore market.
Annual price negotiations between producers and major steel mills remain deadlocked, but analysts believe that contract prices may rise 15% to 20% on top of last year's 71.5% increase.
A BHP spokesman was not immediately available for comment on whether that company's mines have been similarly affected by the heavy rain.
Western Australia has suffered three cyclones this summer. The latest, Emma, caused flooding in the Pilbara when it struck the coast on February 28.
However, there has also been a significant amount of rain outside of the cyclonic events, the Rio spokesman said.
"There is a lot of water in the pits at most of the mines," he said, adding that Tom Price and Marandoo were of particular concern to the miner.
"We're pumping as hard was we can," he said, in a reference to extra pumping equipment that was installed at Rio Tinto's mines following Cyclone Monty in March 2004.
-Stephen Bell, Dow Jones Newswires;
61-8-9245 6408; sgbell@bigpond.com
(END) Dow Jones Newswires
03-05-06 0438ET
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