Rio hits iron ore production record

SYDNEY/LONDON, Oct 14 （Reuters） - Rio Tinto churned out a record amount of its most profitable product, iron ore, in the third quarter as it sought to exploit high prices, reinforcing market forecasts for strong annual profit.

Rio -- the world's second-largest miner of the steel-making raw material behind Brazil's Vale -- reiterated it would boost total iron ore production to 234 million tonnes this year, up 8 percent.

The Anglo-Australian group said it was driving all its divisions near or above capacity to take advantage of an upsurge in mineral prices.

The strong quarterly performance in iron ore outweighed disappointments in copper since iron ore dominates the group's earnings flow, accounting for 70 percent of net profit in the first half of the year versus 18 percent for copper.

The spot price of iron ore has gained 4.6 percent during the third quarter and has nearly doubled since the same time last year.

"This production report points the way for Rio to show a very strong rebound in both production and profits in 2010 and the same for BHP," said a Sydney-based analyst who asked not to be named because he is not authorised to speak to media.

BHP Billiton, the world's third-biggest iron ore miner, is due to report quarterly production data on Oct. 20.

Rio's underlying net profit this year is expected to more than double to $13.5 billion from $6.3 billion in 2009, according to Thomson Reuters I/B/E/S which polled 18 analysts.

"Another stellar performance in iron ore where we estimate Rio is currently making US$107 per tonne margins should outweigh disappointments elsewhere," Liberum Capital in London said in a note.

SHARES HIT TWO-YEAR PEAK

Rio Tinto's shares touched the highest level in more than two years, adding 1.5 percent in London to 4098 pence by 1055 GMT, outperforming a 0.6 percent gain in the British mining index and a modest dip in the blue chip FTSE 100 index.  

The Australian-listed shares ended up 4.4 percent at A$82.08, helped by newly released Chinese data.

China's iron ore imports jumped 17.9 percent in September from the previous month, showing that state-imposed steel production cuts had failed to dent demand from the world's top buyer.

"The biggest factor in the post-global financial crisis recovery -- the urbanisation of China and India -- is ongoing and should drive reasonable growth in the iron ore and steel markets for the foreseeable future," said Resource Capital analyst Trent Allen in Sydney.

The company produced 47.6 million tonnes of iron ore in the third quarter, versus 46.9 million tonnes a year ago, on an attributable basis, most of that shipped to steel mills in China and other parts of Asia.

Rio Tinto owns the majority of its iron ore mines outright through its Hamersley unit, but also operates some in partnership with Australian, Japanese and Chinese investors.

The global iron ore market has stabilised after a volatile period extending from the global financial crisis to the collapse of the annual benchmark pricing system and the introduction of quarterly iron ore contracts in the second quarter of this year, according to Resource Capital Research.

Earlier on Thursday, fellow Australian iron ore miner Fortescue Metals Group said September quarter iron ore shipments rose 8 percent, also on strong demand from steel mills in China and other countries.

A dark spot in Rio's report was data showing mined copper and gold production fell 19 percent and 33 percent, respectively, from the third quarter of 2009, chiefly due to lower ore grading at the Grasberg joint venture with Freeport-McMoran in Indonesia.

Copper prices zoomed 26 percent in three-month London Metal Exchange trading in the third quarter and have continued to rise in October.

Base metals rose in London, New York and Shanghai again on Thursday, with copper at new 27-month peaks on COMEX and the LME, and at its highest level in China since January.