Rio Tinto Boosts Iron Ore Production Target to 360 Million Tonnes by Mid-2015
Despite the shift by Chinese steelmakers to use more local iron ore, mining giant Rio Tinto (ASX: RIO) is not fazed and hopes to cash in on anticipated renewed Chinese demand amid rising prices of the commodity.
To achieve that, Rio announced plans to expand its output in the Pilbara region to 360 million tonnes a year by mid-2015 from previous projection of 353 million tonnes.
For 2012, Rio registered a record-high full year iron ore production of 253 million tonnes, four per cent higher than its 2011 production. The bulk of the output, or 239 million tonnes, came from the Pilbara region.
However, the low iron ore and coal prices caused second-half underlying profits of big miners to drop to $7.7 billion. Analysts forecast that Rio will report a 2012 full-year forecast to $9 billion, down from $15.5 billion in 2011, which would mean a second-half underlying profit of $3.8 billion.
Tom Albanese, Rio Tinto chief executive, said that the mining company's business continues to perform well despite the markets remaining volatile. In 2012, iron ore prices dropped to $89 a tonne, but had since recovered to $158.50 in 2013.
Mr Albanese said aside from logging record annual iron ore production, Rio's expansion programme is on schedule. Iron ore make up over 70 per cent of Rio's earnings
To address unsustainable cost increases, the Rio chief executive said the company plans to cut operating and support costs by more than $55 billion by the end of 2014 and reduce spending on exploration and evaluation projects by $1 billion in 2012 and 2013.
He added the Rio's copper, bauxite, alumina and thermal coal production also went up in 2012. Copper production went up 6 per cent to 548,800 tonnes, but aluminium production went down 10 per cent and thermal coal production grew 16 per cent to 20.6 million tonnes.
In spite of the growth in Rio's coal production, Mr Albanese hinted that it may need to axe jobs in its coal operations in New South Wales and Queensland, although he did not indicate specific number of workers to be laid-off.
