UPDATE 3-Rio hits iron ore production record

* Rio keeps full-yr iron ore guidance at record 234 mln T

* Says all operations running near or above capacity

* Points to strong full-year profit

* Shares hit highest level in more than 2 years

(Adds more analyst comment, details, updates shares)

By James Regan and Eric Onstad

SYDNEY/LONDON, Oct 14 (BestGrowthStock) – Rio Tinto (RIO.AX: ) (RIO.L: )
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 (VALE5.SA: ) — 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 (.IO62-CNI=SI: ) 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 (BHP.AX: )(BLT.L: ), 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.
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Graphic on Rio production http://link.reuters.com/mun48p

Graphic on iron ore prices:
http://graphics.thomsonreuters.com/WT/20100710113541.jpg)
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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 (.FTNMX1770: ) and a modest dip in the blue chip FTSE 100
index (.FTSE: ).

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. [ID:nTOE69C034]

“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 (FMG.AX: ) said September quarter iron ore
shipments rose 8 percent, also on strong demand from steel mills
in China and other countries. [ID:nSGE69D02E]

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 (FCX.N: ) in Indonesia.

Copper (CMCU3: ) 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.
(Editing by Clarence Fernandez and Erica Billingham)

UPDATE 3-Rio hits iron ore production record