Rio to appeal $200m Hancock royalty ruling

Rio Tinto is set to drag Australia's richest person back into the courts, after challenging an order to pay Gina Rinehart's Hancock Prospecting and a third company close to $200 million.

Confirmation that Rio would appeal the NSW Supreme Court ruling came amid an upbeat set of June quarter results that prompted strong buying of Rio shares late on Tuesday.

NSW Supreme Court Justice David Hammerschlag told Rio in May that it should have been paying royalties to companies controlled by Mrs Rinehart and fellow mining heiress Angela Bennett based on a 43-year-old agreement involving both women's fathers.

Hancock launched the action against Rio despite holding a long-standing iron ore joint venture with Rio in the Pilbara that delivers the vast majority of Hancock's revenue.

Rio said on Tuesday "a notice of intention to appeal has been filed in respect of the court's decision".

Despite the challenge, Rio has set aside $US183 million ($199 million) to cover any liability.

The dispute is separate to another long-running dispute between Hancock and Ms Bennett's company Wright Prospecting over the ownership of lucrative iron ore tenements in the Pilbara.

Hancock Prospecting is the biggest shareholder in Fairfax Media.

The 51.8 million tonnes of iron ore that Rio produced in the June quarter was slightly better than most analysts expected, particularly given recent interruptions from rain and equipment failures. It enabled Rio to maintain its full year guidance of 265 million tonnes of iron ore.

There was also good news from the copper division, which reported that the recent wall collapse at the Kennecott mine in the US would not dent production as much as first thought.

The amount of copper mined will now be 100,000 tonnes less than original guidance, rather than 125,000 tonnes as feared in April.

Rio may also be about to pay more mining tax to the Australian government, after reporting that its effective tax rate this year could be 10 per cent higher than last year because its shield against the mining tax was depreciating.

Arguably, the biggest dilemma facing Rio this year is whether to spend $US5 billion expanding its iron ore mines to take production up to 360 million tonnes per year.

The project has come under scrutiny from investors, who question whether Rio should be spending such large amounts of money during an austerity drive.

On Tuesday, Rio said the expansion to 360 million tonnes was "currently under way" but there was no new commitment to spending and its rhetoric around the expansion was slightly different to before.

Instead of sourcing the extra iron ore from new mines and expansions, Rio said it may also be sourced from "incremental tonnes from further productivity improvement at existing mines".