The increase comes amid a sector-wide race to mine more iron ore and is designed to save Rio Tinto $3 billion in development costs by working its existing mines harder, rather than digging new mi-nes. The cheaper path to gro-wth comes as the world No.2 iron ore miner faces pressure to cut costs, reduce capital spe-nding, slash debt and boost returns to shareholders due to weaker commodity prices.
Rio Tinto plans to deliver most of the growth in the next two years, targeting 40 mt of new production by 2015. "They've been able to take a leaf out of BHP's book and squeeze the lemon," said UBS analyst Glyn Lawcock, referring to moves by Rio Tinto rival BHP Billiton to maximise its production runs.
The expansion will deliver more than 60 mt extra by 2017 from a base of 290 mt, but Rio Tinto's move to the top rank could be short lived. Vale is targeting 480 mt a year by 2018, up from 306 mt this year. BHP Billiton, Fortescue Metals Group and others are also expanding iron ore output.
Iron ore prices have held up better than those of most commodities thanks to robust demand from Chinese steel mills, although some analysts question the need for so much new ore.