July 18 (Bloomberg) -- Rio Tinto Group, the world's third- largest mining company, said iron-ore production climbed to a record in the second quarter as it sought to meet rising demand for the steelmaking raw material.
Output of iron ore jumped 11 percent to 37.1 million metric tons in the three months ended June 30, the London-based company said today in a statement. Refined copper production increased 20 percent and aluminum 5 percent.
Rio Chief Executive Officer Tom Albanese said steel, copper and aluminum are the three key metals needed by China when he agreed last week to buy aluminum producer Alcan Inc. for $38.1 billion. Rio and rival BHP Billiton Ltd. are studying additional expansions of their Australian iron-ore mines.
``The signal from them is stronger for longer,'' said Ron Cameron, who helps manage the equivalent of $88 million at Ord Minnett Ltd. in Sydney. ``For the iron-ore market, it's going to take Rio, BHP and everybody else to produce as much as they can to meet demand.''
Shares of Rio Tinto fell 39 pence, or 1.1 percent, to 3,674 pence in London. Other resources stocks including BHP also fell after the prices of copper, gold and oil dropped in New York yesterday.
Steel Ingredient
The price of iron ore has risen for five years to a record, and may gain 25 percent next year due to demand from China, Credit Suisse Group wrote in a report last month. Rio's iron-ore production is recovering from the 8 percent quarter-on-quarter decline it suffered in the March quarter after cyclones struck northwestern Australia, where its mines and port are located.
Rio is spending $5 billion between 2003 and 2008 to expand iron-ore mines, railroads and ports in Western Australia state. It's studying a further expansion to 320 million tons, from the 220 million-ton capacity it expects to have in 2009.
Production of coking coal, also used in steelmaking, rose 6 percent to 1.6 million tons, from a year ago, due to ``a recovery in market conditions,'' Rio said in the statement.
The company owns 30 percent of Chile's Escondida, the world's largest copper mine, and 40 percent of the Grasberg mine in Indonesia, which is operated by Freeport-McMoRan Copper & Gold Inc. Grasberg is the world's second-largest copper mine.
Rio said its output of refined copper climbed to 100,700 tons in the second quarter due to higher production from its Escondida plant. Mined copper output fell 10 percent to 186,400 metric tons due to lower grades at Kennecott.
Copper Prices
The price of copper futures in London has gained 23 percent this year amid increase demand from Chinese manufacturers concern that strikes at mines in Latin America will reduce supply.
Copper is the biggest contributor to Rio's earnings, accounting for 48 percent in 2006. Iron ore is second, accounting for 31 percent. Rio may post a record full-year profit of $8.2 billion, up 10 percent from a year ago, according to the mean estimate of 15 analysts complied by Bloomberg.
Production of aluminum, the light metal used in airplanes parts and packaging, rose 5 percent to 216,500 tons in the second quarter from a year ago. Alumina, which is used to make aluminum, fell 20 percent after Rio sold a stake in a refinery.
A combination of Rio and Alcan would be the world's largest producer of aluminum, Rio said last week.
To contact the reporter on this story: Tan Hwee Ann in Melbourne at hatan@bloomberg.net.
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