Rio Tinto maintains plans to increase iron ore production

 
Suzie Neuwirth
RIO TINTO’S chief executive said that the miner is likely to continue its iron ore expansion plans, despite widespread concerns that increased supply will lower prices.

At the FTSE 100 firm’s annual meeting in Sydney, Sam Walsh said that the final decision to raise output to 360m tonnes would be made by the board near the end of 2013, with increased demand expected to come from China.

“Iron accounts for around 80 per cent of Rio Tinto’s business and they’re not willing to cut that back,” Cailey Barker, analyst at Numis Securities, told City A.M.

“It is difficult to predict China’s exact growth rate. Meanwhile the iron price has shown weakness in recent weeks and I think it will drift down this year.”

Richard Knights, analyst at Liberum Capital, suggested that the board may not approve the plan. “I think they may decide to optimise their asset base instead, which would be more capital-efficient than embarking on new greenfield mine expansion,” he said.

Walsh, who took over earlier this year, has vowed to slash $5bn (£3bn) in costs by the end of 2014, cutting jobs and selling assets.