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Rio tipped to boost iron ore production


Rio Tinto is expected to post an increase in iron ore production for 2012 but investors will be more interested in the miner's outlook for this year than last.

Rio kicks off the release of December quarter production figures on Tuesday, with analysts expecting flat to weak numbers of about 67 million tonnes for the last three months of 2012 compared to the third quarter.

That would bring annual production up to 254 million tonnes (mtpa) compared to guidance of 250 million tonnes but earnings are expected to be weaker compared to 2011 as commodity prices fell in 2012.

Rio produced 245 million tonnes in 2011.

Fellow miners BHP Billiton and Fortescue Metals report their numbers later in January.

Rio is the second-largest iron ore producer in the world and has stayed bullish, pushing on with its massive expansion plans even as the price of the commodity plunged in September last year to below $US90 a tonne.

It recovered in the December quarter to an average $US117 and is currently at $US158, as the Chinese steel mills that dramatically destocked last year are building up their inventories again.

Analysts expect the price to fall as another 80 million to 100 million tonnes of new supply comes online in 2013.

Rio aims to increase production to 290mtpa before the end of 2013 and to 360mtpa by 2017 (although some mines are yet to be approved) while reducing costs to $US35 a tonne from $US47.

Deutsche Bank's Paul Young said in a note to clients that majors such as BHP Billiton and Rio Tinto were well placed as sentiment toward the mining sector and commodities demand improved from last year.

World growth was tipped to be a healthy 3.2 per cent this year, then 4.0 per cent in 2014 with China's economic growth set to rise to 8.5 per cent by the second half of 2013, he said.

Deutsche Bank is forecasting annual production of 254.3 million tonnes and flat production in the December quarter of 67 million tonnes.

It has tipped a three per cent rise in sales to 67.5 million tonnes and 247.6 million tonnes for the year, compared to 239 million tonnes in the previous year.

RBC Capital Markets analyst Des Kilalea tips a slight drop in fourth quarter production and an annual figure of 253 million tonnes.

The miner's second-biggest earner, copper (representing about 20 per cent compared to more than 70 per cent for iron ore) is expected to be a big improver for the quarter.

Deutsche Bank is forecasting a 23 per cent lift in copper production to 162,200 tonnes from the previous quarter, but annual an number of 548,800 tonnes below guidance of 560,000 tonnes.

RBC Capital Markets is forecasting only 144,000 tonnes for the quarter.

Rio shares closed 19 cents higher at $65.99 on Monday.