Rio Tinto eyes huge growth

Rio Tinto has signalled that predictions of falls in iron ore prices hold no fear for it as it posts record annual production and says its massive expansion plans are on track.

The world's second biggest iron ore producer's full year result of 253 millions tonnes (mt) beat its own guidance of 250mt by 1.2 per cent and topped last year's 245mt by four per cent.

It calls itself a diversified miner but iron ore represents more than 70 per cent of Rio's earnings, and it plans to boost annual production to 290mt this year, to 360mt by the first half of 2015 and could become the world's largest producer.

Iron ore prices plunged in 2012 to $US85 ($A80.79) a tonne, threatening the profitability of Fortescue Metals and other miners - and the federal government's mining tax - but have now rebounded to close to $US150 ($A142.58).

The lower prices contributed the majority of a 34 per cent drop in Rio's first half profit to $US5.2 billion ($A4.94 billion) with UBS expecting a full year result next month of $US9.3 billion ($A8.84 billion), 40 per cent below last year's $US15.5 billion ($A14.73 billion).

Rio Tinto chief executive Tom Albanese said on Tuesday it had been a strong operational performance in 2012.

"Our expansion program continues on schedule, delivering industry leading returns for our shareholders," he said in a statement.

"Markets remain volatile, but our business continues to perform well.

"Across the group we are taking action to roll back unsustainable cost increases."

That is likely to mean job losses, with the miner already releasing plans to reduce operating and support costs by more than $US5 billion ($A4.75 billion) by the end of 2014 and will cut spending on exploration and evaluation projects by $US1 billion ($A950.53 million) over the remainder of 2012 and 2013.

Its shares closed nine cents lower at $65.90.

Analysts are divided on how long the high iron ore prices will last, but most think there are more reasons for it to fall, such as increased supply due this year from Pilbara miners.

UBS resources research head Glynn Lawcock said while Rio Tinto might be becoming more of a pure iron ore company that was where the money was.

Rio was so far down the cost curve, producing at about $US40 a tonne pre-tax, that unlike other iron ore players it was still highly profitable even when the price fell, he said.

"Today's quarterly (results) just shows you while they are continuing to drive a very, very successful iron ore business they will have very, very high margins," he told AAP.

At current prices of about $US150 a tonne, Rio was making a pre-tax margin of $US110.

It lifted fourth quarter iron ore production by two per cent on the same period last year to 66 million tonnes.

It shipped 247 million of those tonnes, also a record high amount, including 233 million tonnes out of the Pilbara in Western Australia.

Including joint venture partners such as Gina Rinehart's Hancock Prospecting at Hope Downs mine, Rio's share of production was 199 million tonnes.

Production of the company's second biggest earner, copper, (representing about 20 per cent compared to more than 70 per cent for iron ore) increased by six per cent in 2012, to 548,800 tonnes.

Aluminium production slumped by 10 per cent, weighed down by the Alma labour dispute in Canada.

Thermal coal production was 16 per cent higher than in 2011 at 20.6 million tonnes, but higher margin hard coking coal production fell nine per cent to eight million tonnes, which will hurt earnings.

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