Rio Tinto committed to increasing its annual iron-ore output in Australia by around 25%, but said the expansion would cost less than originally planned and take longer than expected.
The move represents a bet on China's future demand for iron ore, despite its economy stuttering in recent months and analysts' forecasts for a steady fall in the price of the steelmaking commodity in coming years. China imports around 60 per cent of the world's iron ore to make steel for use in everything from the skyscrapers to luxury sedans.
Rio Tinto said it would focus on expanding existing mines as it looked to increase its production capacity in the Pilbara region to 360 million tons of iron ore a year. By targeting those mines first, Rio Tinto said it would save more than $US3 billion in costs compared to its original expansion plans.
Rio Tinto will spend $400 million to fund the expansion, which will increase mine production capacity by more than 60 million tonnes a year between 2014 and 2017.