Shares of Rio Tinto Limited (ASX: RIO) plunged 3% today, despite announcing a positive market update this morning.
Overnight, the market price of iron ore fell 5.1% to just $US49.60 per tonne, counteracting any positive sentiment towards Rio Tinto's first official shipment of aluminium from its Kitimat smelter in Canada.
Following years of development and a $US4.8 billion investment, the Kitimat Modernisation project has transformed the facility into one of the lowest-cost aluminium producers in the world.
At full capacity, the upgrade takes total production from 282,000 tonnes per year to around 420,000 tonnes per year. "Rio Tinto is now focused on safely ramping up towards its annual production rate of 420,000 tonnes," the company said in its ASX market update.
The modernised Kitimat smelter will be powered by Rio Tinto's fully-owned hydropower facility and uses proprietary technology, making it one of the most efficient, greenest and lowest-cost in the world.
Is it time to buy Rio Tinto shares?
In recent years, Rio Tinto's Aluminium division has been plagued by huge write-downs and losses. However, in its 2014 financial year, the business finally began to produce a meaningful return for shareholders.
Even still, it remains a small contributor to overall group earnings, and at the moment Rio is heavily leveraged to the plunging iron ore price. Therefore, it's probably a good idea to keep its shares out of your portfolio for the foreseeable future.
