Rio Tinto iron ore output at record high

Rio Tinto produced record quantities of iron ore last year as it raced to meet surging Chinese demand and cash in on soaring prices, but coal output was disrupted by Australian floods.

Iron output rose 6 per cent on the year in the fourth quarter and 9 per cent on the year.

While Rio's Australian hard coking coal output was up by a fifth in 2010, it slid from the third to the fourth quarter and is likely to drop further as the full impact of Queensland floods is felt.

Australian thermal coal production was down 9 percent overall for the year, mainly due to wet weather in the Hunter Valley coal region, it said.

Declaration of force majeure at four Queensland coal mines due to flooding in December remained in place, the company said.

"All the Queensland coal mines are operational but are still constrained in some way by weather impacts, including the impact on third party infrastructure," the company said, adding it was unable to estimate the full impact of rains or the duration of the force majeure declaration.

Aluminium production by Rio Tinto, the world's biggest producer, was broadly flat in the fourth quarter at 962,000 tonnes.

Rio Tinto's global iron ore operations set a quarterly production record of 65 million tonnes, 50m tonnes of which is attributable to the company after subtracting material going to partners and an annual record of 239m tonnes, 185m tonnes of which goes to Rio Tinto.

Rio Tinto has earmarked $1.2 billion to increase production capacity in Australia's Pilbara region to 283m tonnes a year by the fourth quarter of 2013.

Rio Tinto is the world's second-largest iron ore miner sandwiched between top producer Vale and BHP Billiton , which reports quarterly data on Thursday and also is tipped to post record output.

Credit Suisse forecasts Rio Tinto will boost net profit after tax three-fold to $14.87bn, from $4.87bn in 2009.

Rio Tinto shares ended 1 per cent higher at A$86.80, slightly outpacing gains in the wider market .

But the stock lagged well behind the 8 per cent jump in smaller iron ore miner Fortescue Metals Group, which earlier on Tuesday reported a 9 per cent rise in quarterly output and outlined expansion plans.

Spot iron prices are trading at their highest since April, buoyed by robust demand from top buyer China ahead of the Lunar New Year early next month and providing global miners like Rio Tinto strong incentive to boost output. Barring any major cyclones to hit the Pilbara iron ore belt, Rio's iron ore production is likely to remain strong this year.

"The cyclones are an annual event. I don't think Rio had any problems last year and they try as much as possible to limit any loss of production," said James Wilson, analyst at Royal Bank of Scotland.    

"At the moment there's been nothing seriously affecting their iron ore output, but it remains to be seen what happens this season."    

But some analysts warn a shortage in coking coal, if mines in top producer Australia take time to fully recover and resume production, could hurt demand for iron ore and cut the current price rally.    

"If coking coal supply really comes off, then steelmakers won't buy any more iron ore so iron ore prices would drop," said Scott Laprise, steel analyst at CLSA in Beijing.

Rio Tinto's mined and refined copper output was down 9 percent and 6 percent on the fourth quarter of 2009 and down 16 per cent and 5 per cent on full year 2009, in line with previous guidance.

The report showed total production of mined copper from the world's biggest mine, Escondida in Chile, increased to 786,800 tonnes in 2010 from 774,400 in 2009, but dropped to 194,600 tonnes in the fourth quarter from 233,000 a year ago,

Copper cathode output at Escondida was 300,000 tonnes in 2010 against 327,000 in 2009, while production in the fourth quarter was 82,000 tonnes versus 80,000 a year ago, the data showed.

Rio Tinto holds a 30 per cent interest in Escondida. BHP Billiton owns 57.5 per cent and a consortium of Japanese firms and the International Finance Corp hold the remainder.     

BHP Billiton has warned Escondida production would decline by 5-10 per cent in 2010/11 (ending June 30, 2011) mainly due to mining of less rich ores.