Rio to get nothing from Grasberg - poorer ore quality: Report

Rio Tinto Group, the world's third-largest miner, might get almost no profits from its share of Freeport-McMoRan's Grasberg mine in 2007 as copper output at the mine declined, The Sydney Morning Herald reported Thursday quoting Bloomberg.

Rio's share of profits from copper production at Grasberg, the world's second-biggest copper mine, might fall to US$8 million in 2007, compared with an expected $155 million this year, Macquarie Bank analysts Ben Lyons, Brendan Harris and Sam Catalano said in a note.

Rio's copper chief executive, Tom Albanese, gave a briefing to analysts in London on Tuesday.

Rio owns 40 percent of the Grasberg mine in West Papua, Indonesia, and receives profits from the mine only when output exceeds a certain amount. Freeport was mining a lower grade section of the mine, which would reduce production, the analysts said.

Demand for copper has surged globally, driving prices to a record this year.

"This came as no surprise to Macquarie," the report said. "It may induce modest earnings downgrades across the market."

Freeport, based in Louisiana, said on November 29 that fourth-quarter production from Grasberg would fall short of targets due to lower grade ores. (*)