Rio Tinto iron ore output climbs despite glut

The slide in iron ore prices has not kept the world's second-largest producer from pushing up output.

Rio Tinto, the Anglo-Australian miner, said iron ore production climbed 12 per cent from a year earlier to 74.7m tonnes in the three months to the end of March, in spite of the price of the commodity more than halving over the last year.

The first-quarter figure, which fell short of analyst expectations, includes production from mines in which Rio Tinto owns a stake. The company reiterated its earlier projections that it would ship 350m tonnes of iron ore in 2015.

Iron ore futures for delivery in China have declined from more than $130 a tonne to roughly $51, as lacklustre demand in the world's second-largest economy coupled with rising supplies created an imbalance.

Sam Walsh, Rio Tinto chief executive, said the company would continue to work to drive efficiency in its business as it competes for market share.

"Our aim is to protect our margins in the face of declining prices and maximise returns for shareholders throughout the cycle," he said on Tuesday.

The company shipped 72.5m tonnes in the quarter, up 9 per cent from a year earlier but down 12 per cent sequentially.

Glyn Lawcock, an analyst at UBS, said shipments were affected by tropical cyclone Olwyn last month and a train derailment that temporary blocked loading at Dampier port in the Western Australia's Pilbara region. He said the quarterly production figures indicated Rio was operating at a rate of 303m tonnes per year.

Rio added that expansion of rail and shipping infrastructure at its Pilbara operations remained on track for completion in the first half of 2015.

It added that it would draw down iron ore inventory throughout the year to maximise cash flow as part of its continuing efficiency programme.

Iron ore last week notched its biggest weekly gain of the year as Chinese steel mills stocked up on the steel-making ingredient. However, the outlook for the commodity - which drives the profitability of major mining groups including Rio Tinto and BHP Billiton - remains bleak as China's economy slows.

Rio, BHP and Fortescue dominate Australian iron ore production and have been on a multiyear drive to expand output. However, only Rio and BHP have remained profitable in spite of the fall in iron ore prices, due to their lower cost of production.

Fortescue, the world's fourth-largest iron ore supplier by output, has been cutting costs and the company's founder, Andrew Forrest, even called for miners to cap output to halt the price fall.

Rio Tinto shares rose 1.6 per cent to A$55.51 in Sydney trading.

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