The Rio Tinto Limited (ASX: RIO) share price will be on watch on Monday after the mining giant provided an update on its iron ore operations in the Pilbara, Western Australia.
According to the release, the mining giant's operations are progressively resuming following the passing of Tropical Cyclone Veronica.
However, management advised that initial inspections have uncovered some damage to its Cape Lambert A port facility. Cape Lambert A is an iron ore terminal capable of loading more than 85 Mt/a.
In light of this damage, the company has declared a force majeure on certain contracts and is now working with its customers to minimise any disruption in supply.
What impact will it have on production?
The release explains that the impact of the production disruption caused by the cyclone and repair works, combined with the damage caused by a fire at Cape Lambert A in January, will result in a loss of approximately 14 million tonnes of production in 2019.
This means that Rio Tinto's Pilbara shipments in 2019 are now expected to be at the lower end of the 338 and 350 million tonnes guidance range provided previously.
What now?
Whilst this is disappointing news, it was unavoidable and could arguably have been far worse.
And thankfully, with iron ore prices at elevated levels, the company remains well positioned to generated significant free cash flows from its iron ore segment once again.
In light of this, I think that any notable weakness in its share price on Monday could be a buying opportunity for investors.
In addition to Rio Tinto, I feel fellow mining giant BHP Group Ltd (ASX: BHP) is worth considering as well. I would choose both ahead of low-cost iron ore producer Fortescue Metals Group Limited (ASX: FMG), which I think is fully priced now after its stellar 70% year to date gain.
