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Rio Tinto produced, shipped record iron ore in 2012; aluminum drops 10 per cent

MONTREAL - Global mining giant Rio Tinto expects to enhance its "competitive edge" by continuing to cut costs this year after achieving record iron ore production and shipments in 2012 while suffering a 10 per cent drop in aluminum output related to

MONTREAL - Global mining giant Rio Tinto expects to enhance its "competitive edge" by continuing to cut costs this year after achieving record iron ore production and shipments in 2012 while suffering a 10 per cent drop in aluminum output related to its lockout of employees in Alma, Que.

"This was another year of strong operational performance across the group...as our expansion program continues on schedule, delivering industry leading returns for our shareholders," chief executive Tom Albanese said in a statement accompanying production results for the fourth quarter and full year.

The miner shipped 247 million tonnes of iron ore in 2012 despite weather disruptions and a significant maintenance shutdown during the year. Production increased four per cent to 253 million tonnes. Rio Tinto's share of production was 199 million tonnes, led by its operations in Australia.

Production in the fourth quarter grew two per cent to 66 million tonnes, with Rio's share reaching 52 million tonnes.

The London-based miner said thermal coal production increased 16 per cent last year, while copper output increased six per cent and bauxite and alumina production grew 11 and 12 per cent respectively.

"Markets remain volatile, but our business continues to perform well. Across the group we are taking action to roll back unsustainable cost increases. This further enhances our resilience and competitive edge as we enter 2013.”

Production by the Iron Ore Company of Canada, jointly owned by Rio Tinto and Mitsubishi, grew 13 per cent to 2.3 million tonnes of pellets and concentrate in the fourth quarter due to operating improvements and the first phase of an expansion designed to increase annual production to 22 million tonnes. A second phase, expected to be completed in the first quarter, will lift capacity to 23.3 million tonnes.

Production in the quarter was down three per cent from the third quarter. For the full year, production grew five per cent to 8.3 million tonnes.

Total Rio Tinto aluminum production dipped 5.7 per cent to 906,000 tonnes in the fourth quarter, but was up nearly six per cent from the third quarter as it continued to ramp up production in Alma.

For the full year, production was 3.46 million tonnes, off 10 per cent from 2011 "as ramp up to normal capacity continued following resolution of the Alma labour dispute."

Production at Rio Tinto's six wholly owned Canadian smelters decreased 17 per cent to 1.1 million tonnes in 2012, but production increased each quarter to reach 318,000 tonnes in the fourth quarter, off six per cent from a year ago.

Alma's production ramped up to reach 90,000 tonnes in the fourth quarter. But output was just 208,000 tonnes for the year, compared with 434,000 tonnes in 2011.

The smelter in Kitimat, B.C., enjoyed an 8.3 per cent boost in production to 182,000 tonnes in 2012 on stable quarterly output.

Rio's share of production at the Quebec Alouette and Becancour smelters was also stable.

Rio Tinto Iron & Titanium production grew by 18 per cent to reach 450,000 tonnes in the fourth quarter, and by 10.4 per cent to 1.6 million tonnes for the year.

Diamonds processed at the Diavik mine in the Northwest Territories that is co-owned with Harry Winston (TSX:HW) reached 1.9 million carats in the four quarter and 7.2 million carats for the year, up 19 per cent and eight per cent respectively.

The production report follows Harry Winston's announcement on Monday that it will sell its retail high-end jewellery operation to Swiss watch company Swatch in a $1-billion deal, including $250 million of assumed debt.

Harry Winston, which will be renamed Dominion Diamonds, said it intends to use some of the US$750 million cash it gets to fund growth in its mining business — which has been focused on Canada's Far North.

Some analysts suggest the company may buy Rio's 60 per cent stake in Diavik or the Anglo-Australian mining giant's entire diamond division.

Tony Robson of BMO Capital Markets said the production results in the fourth quarter were mixed. While iron ore and coal production beat his forecasts, copper came up short and aluminum was in line.

Rio's exploration and evaluation expenses surged to US$1.98 billion.

In a research note, Robson said the results were "acceptable overall," reiterating his outperform rating.

On the New York Stock Exchange, Rio Tinto's shares were up 15 cents at US$55.96 in Tuesday afternoon trading.