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Miner Rio Tinto to expand iron ore production on growing China’s demand

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Tom Albanese, chief executive at Rio Tinto PLC

Tom Albanese, chief executive at Rio Tinto PLC

Rio Tinto PLC, the world's second largest mining company, informed that it would expand iron ore production by approximately 15 percent as it saw its 2012 output grow to about 253 million tons, topping its earlier forecast. The strong results were pushed mainly by the revival in China's demand for iron ore.

Rio Tinto's 2012 results

On the 15th of January, Rio Tinto posted its fourth quarter results showing that iron ore production climbed to about 52 million tons in the final three months of 2012, compared to slightly over 51 million tons in the same period a year ago. According to data, Rio Tinto produced roughly 253 million tons of iron ore in 2012.

Rio Tinto saw production of iron ore from its mines located in Australia and Canada increase about 4 percent in 2012, exceeding the miner's forecast of approximately 250 million tons. In addition, data showed that the Pilbara mines contributed over 90 percent of total production and as many as 239 million tons came from these facilities.

Iron ore accounts for approximately 75 percent of Rio Tinto PLC's annual profits. Iron ore has enjoyed a surprising increase as China's demand for it is still growing and has raised prices in recent months. According to data, iron ore prices have grown as much as 80 percent since September 2012 due to China's demand mainly pushed by a recovery of the world's second economy.

Tom Albanese, chief executive at Rio Tinto PLC,  said that conditions were unsound, however he underlined: “This was another year of strong operational performance across the group.”

Rio Tinto's expansion plan

While Rio Tinto, the world second-largest miner after Brazil's Vale, is enjoying growing demand for iron ore, it has decided to implement an expansion plan in that segment of its operations. Just in 2012, global miner Rio Tinto decided not to reduce its expansion plans despite the fact it experienced a weak performance in the sector. Unlike Rio Tinto, BHP Billiton Ltd. chose to call off its port expansion plans in Australia and focus on smaller expansion plans of its own.

As it has been announced by Rio Tinto, the global miner attempts to produce 290 million tonnes by the end of 2013. By the end of 2013, Rio Tinto aims to produce roughly 360 million tonnes of iron ore. If the company's expansion plans come true, Rio Tinto will replace Vale S.A. as the world's largest producer of iron ore.

In addition, a gain of over 50 percent in the company's iron ore production capacity in the Pilbara area is projected in the next three years. On the 15th of January, global miner Rio Tinto also informed that it had accepted expansion plans of rail, port and other facilities which are crucial to increase iron ore production in the aforementioned area.

Even though the world's second-largest miner posted the increase in iron ore production, the company decided to keep on reducing controllable costs to secure the mining profit as its Australia 's coal and aluminum businesses have been struggling recently due to rising costs and the strong Australian dollar.

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