Bumper year for Rio in iron ore

RIO TINTO has defied the pricing tremors that struck the iron ore sector over the past year to produce, ship and sell record amounts of the bulk commodity in 2012.

RIO TINTO has defied the pricing tremors that struck the iron ore sector over the past year to produce, ship and sell record amounts of the bulk commodity in 2012.

Rio produced a record 253 million tonnes of iron ore in 2012, with about 79 per cent of those volumes owned by Rio and the remainder held by joint venture partners such as Gina Rinehart's Hancock Prospecting.

The stellar result from the company's flagship division was slightly better than guidance, and means Rio is on track to meet expectations for a full-year net profit in the region of $US9.2 billion next month.

An operations report released on Tuesday showed Rio did not slow down its iron ore sales during the pricing slump that struck the iron ore sector in the second half of 2012.

The benchmark price fell below $US87 per tonne in September - almost 80 per cent lower than it was fetching this week - but sales data suggests Rio was undeterred, and sold higher volumes of iron ore in each successive quarter of 2012.

JP Morgan analyst Lyndon Fagan said the results were pleasing given iron ore was a prime driver of Rio's share price.

"[Iron ore] has had a significant run recently and some investors may view further price gains cautiously from here," he said.

Despite producing 15 per cent more thermal coal from Australia in 2012, Rio said there was no sign of relief from the rising costs and lower prices that have overshadowed the Australian coal industry in recent months.

Rio boss Tom Albanese said costs would continue to be cut, meaning there could be more jobs lost in Queensland and NSW.

"Rio Tinto is actively reducing controllable costs in this business," Mr Albanese said.

While iron ore clearly dominates Rio's business, new spending figures show the company is looking to another division to reinforce its future.

Exploration spending in 2012 was dominated by the search for copper, which commanded almost twice as much funding as iron ore.

A breakdown of its $US1.97 billion spend on exploration and evaluation shows that 41 per cent was spent on copper projects, with greenfields exploration underway in nine countries including Australia, Chile, the US, Russia, and Mongolia.

"Rio are very keen to grow their copper division, and given they've already got established iron ore resources we are not surprised to see that outcome," said Mr Fagan.

Copper ranks as Rio's second biggest revenue spinner, and the division's profile should grow as the Oyu Tolgoi mine in Mongolia - the company's prime growth asset - comes into production.

Bringing Oyu Tolgoi to production ranks as Rio's most important task in 2013, with commercial production due by June. The first ore was processed through Oyu Tolgoi's concentrator on January 2, meaning that production of concentrate should begin next month.

A power supply deal for the project was struck with companies across the border in China, and Rio said 25 per cent of the concentrate would go to smelters in the nearby Chinese province of Inner Mongolia.

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