* Rio Tinto ups minerals output to feed Chinese demand
* Record iron ore output in 2013 set to rise further
* Kennecott copper shows fast recovery afer mine collapse
By James Regan
SYDNEY, Jan 16 (Reuters) - Rio Tinto reported big increases in the production of iron ore and other minerals in 2013, betting China’s massive economic growth will provide a ready market for decades to come.
Despite some current signs of weakening demand, Rio and rivals BHP Billiton, Brazil’s Vale and Australia’s Fortescue Metals aim to add more than a combined 150 million tonnes of iron ore production this year, more than fourth-ranked Fortescue’s total 2013 output.
“These big miners have the lowest costs in the industry. This gives them the capacity to feed into perhaps a stronger iron ore market in the future,” said David Lennox, a mining analyst with Fat Prophets in Sydney.
Rio Tinto, the world no. 2 iron ore miner behind Vale, did not provide guidance on this year’s production, but expects to reach an iron ore production rate of 290 million tonnes a year by mid-2014, up 9 percent on 2013, as it seeks to feed Chinese steel furnaces with high-grade material.
Shipments of iron ore from Australia beat production by 2 million tonnes in the fourth quarter, despite the impact of cyclone Christine, which closed Rio Tinto’s two ports for three days at the end of December and affected rail and ports into January.
Faced with declining grades of iron ore from its domestic mines and mounting environmental concerns that come with digging up roughly 4 billion tonnes of dirt each year, China is using less and less of its own ore for steelmaking.
That bodes well for importers like Rio Tinto that mine ore five to six times the purity of Chinese material.
Rio said production of iron ore, which makes up about 90 percent of its earnings, reached 266 million tonnes in 2013, slightly ahead of guidance and up 5 percent on a year earlier.
Some analysts expect cooling demand for iron ore after a recent decline in steel prices in China prompted some mills to reduce production, cutting China’s average daily output to 1.961 million tonnes in late December, the first time it has fallen below 2 million tonnes in almost a year.
Iron ore was $129.60 a tonne on Wednesday, down from a recent high near $140 and just off a six-month, according to Steel Index.
“With China’s economic restructuring underway, steel production started to peter out in the second half of 2013 and will continue to cool down in 2014, reducing demand for iron ore and weighing down on iron ore prices in our view,” UOB-Kay Hian Securities senior mining analyst Helen Lau said in a note.
Analysts have questioned the need to flood the market with more ore but mostly acknowledge that with the lowest production costs of any miner, Rio Tinto could weather any downturn in good shape.
Rio Tinto does not disclose production costs, although outside estimates have put average cash costs as low as $26 per tonne.
Refined copper output came in ahead of the Rio Tinto’s forecasts, up 19 percent on a year earlier as the Anglo-Australian company’s Kennecott Utah Copper unit recovered more rapidly than anticipated from a wall collapse. Mined copper was up 29 percent.
The collapse at the Bingham Canyon mine last April shifted 150 million tonnes of material and registered 2.4 on the Richter scale.
“The recovery of the open pit operations following the pit wall slide continues to progress better than originally planned, with completion of the new heavy vehicle access road achieved ahead of schedule enabling further remediation and waste movement to provide additional access to ore,” it said.
Rio Tinto also said it exceeded cost cutting targets for 2013, with more than $2 billion removed from operating expenditure. It also cut $1 billion in exploration and evaluation spending compared to a target of $750 million.
“We think the cost-out beat illustrates Rio’s success at improving productivity,” UBS analyst Glyn Lawcock said in a note.