Sydney - Global miner Rio Tinto aims to boost iron ore output by 15% this year after production in 2012 climbed to 253m tonnes, beating its own guidance, as resurgent Chinese demand drives a price recovery.
Rio Tinto, the world's second-biggest producer behind Brazil's Vale, has stuck to an aggressive expansion plan in iron ore driven by the hope of top buyer China underpinning prices.
"Markets remain volatile, but our business continues to perform well," Rio Tinto Chief Executive Tom Albanese said in the company's fourth-quarter production report.
Iron ore prices have soared more than 80% since September as Chinese steel mills -- the single biggest buyers of seaborne-traded ore - returned to the market on signs of a recovery in the Chinese economy.
Benchmark prices <.IO61-CNI=SI> hit a 15-month high of $158.50 a tonne last week, as China's iron ore imports topped 70m tonnes for the first time in December helped by a resurgent economy and a cold snap that cut local production.
Iron ore prices have started to retract, however, suggesting a peak in the recent cycle, though analysts are not expecting a return to sub-$100 a tonne levels that could threaten production from more marginal producers.
Rio Tinto stands to benefit the most from a healthy market for ore, given its sub $30 per tonne average production costs and heavy weighting to the sector versus its other business units.
A $10 per tonne rise in the iron ore price can increase Rio's full-year earnings by more than 10%.
UBS is forecasting a drop in Rio Tinto's earnings before interest and tax to $13bn in 2012 from $15.3bn in 2011 after iron ore prices came under pressure for most of last year.
In the last month, iron ore has rebounded by about a third, although a further rally will hinge on whether Chinese demand outpaces the rise in global supply this year.
Rio Tinto is targeting an annual production rate of 290m tonnes by the end of 2013 before lifting output to 360m tonnes in 2015 pending board approval. The tonnage also includes output from the company's iron ore mines in Canada.
It said it had most board approvals in place for the next phase of its expansion work to take output to 360m tonnes.
Australian rivals in iron ore BHP Billiton and Fortescue Metals Group report fiscal 2013 December-quarter figures on Jan 23 and Jan 24, respectively.
BHP aims to boost output to an annual rate of 220m tonnes by fiscal 2014.
Fortescue, too, is expanding at a fast clip, reaching a record 100m tonne yearly operating rate through its loading facilities in December.
It is targeting annualised production of 115m tonnes by the end of March and 155m tonnes by late December.
In aluminium, Rio Tinto said it produced 10% less primary metal in 2012 versus 2011 due to a labour dispute.
It also said it would decide later this month whether to mothball the Gove alumina refinery in Australia due to high operating costs.
Critical to a decision to continue operating the refinery is securing long-term gas supplies to switch from higher cost fuel oil, it said.
Rio Tinto shares were little changed at A$65.9 on Tuesday, in step with the wider market.