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UPDATE 2-Rio speeds up cost cuts to cope with China slowdown

* Rio cautious on impact of China stimulus

* Sees high cost Chinese production shutting down

* Optimistic on China power supply for Mongolia copper mine

* Does not expect major project approvals in near-term

(Adds details, quotes) By Clara Ferreira-Marques

LONDON, Oct 9 (Reuters) - Global miner Rio Tinto said on Tuesday it would step up cost cuts because of an uncertain near-term outlook that includes lower growth this year in China, the world's largest consumer of key commodities.

Rio said it had already made annual costs cuts of $500 million so far in service and support roles, and would now trim in operations, project studies and elsewhere, cutting an unspecified number of jobs. It had imposed a hiring freeze for support staff early this year.

The world's second-largest iron ore miner is widely seen as the diversified producer most exposed to China and its industrial recovery. More than 80 percent of Rio's earnings in 2012 are expected to come from iron ore, used in steelmaking.

Rio is counting on Chinese infrastructure spending plans to drive a pick up in steel demand. But Chief Executive Tom Albanese, speaking ahead of an investor seminar, said the miner expected to see the impact of Chinese stimulus efforts only progressively and after leadership changes starting this year.

"There is some good news coming. The question is when will all of this flow through, ultimately, to our markets," Albanese told reporters, pointing to "considerable price fluctuations."

"Overall, I'd say that we are more cautious on the outlook for the next few quarters for our business than we would have been a couple of months ago."

Rio said it saw positive signs in China and the "deceleration is probably bottoming out," pointing to indicators including rising home prices in major cities.

But the company cut its forecast for Chinese economic growth in 2012 to "just below" 8 percent, from 8 percent, in line with the International Monetary Fund's revised forecast on Tuesday.

Iron ore prices have slumped 42 percent from a high in April to a three-year low of $87 a tonne last month. They have rebounded to $110, but remain well below a perceived floor of $120, where high-cost Chinese producers would lose money.

Rio estimated around 100 million tonnes of Chinese iron ore output had become unprofitable and said it saw evidence "that a large proportion of this has already been curtailed."

The steep fall in iron ore prices and volatile markets have spurred Rio to speed up cost cuts, alongside peers including BHP Billiton and Anglo American .

Rival BHP confirmed earlier on Tuesday that it is targeting job cuts in iron ore, its most profitable arm, adding to mining job losses around Australia.

Miners across the board have cut back on new mines, and Albanese said Rio's new projects were coming under even greater scrutiny as it tightens control of capital allocation.

"I would not expect any major new project approvals in the near term," he said, sticking to the miner's target spending of $16 billion for this year - a peak.

"We need to be pulling in the reins." MONGOLIA CONFIDENCE

The company's copper business has a brighter near term outlook than iron ore, but Rio flagged potential delays at its newest project, the massive Oyu Tolgoi copper-gold mine in Mongolia, due to prolonged talks with China over power supply.

Analysts have fretted as talks with Chinese authorities have dragged on, though Albanese said he saw "real momentum", with final discussions coming down to commercial terms. "I am confident they will come to a commercial understanding."

Lengthier talks could affect the ramp up timetable at the mine, unless a deal is reached before the end of the year. The mine is currently scheduled to begin commercial production in the first half of 2013.

According to Rio's statement, once a power deal with China is signed, the first ore would be processed within six weeks, and first concentrate production would start a month later. Commercial production could take up to 8 months from the point at which power is received, its analysts' presentation said.

Rio expects copper production across the group to increase from 2013 thanks to improving grades at existing mines and the start of production at Oyu Tolgoi, forecasting a cumulative annual growth rate of 13 percent from 2011 to 2015.

(Additional reporting by Sonali Paul in Melbourne. Editing by Kate Holton and Jane Merriman)

((clara.ferreira-marques@thomsonreuters.com)(+44 207 542 3214)(Reuters Messaging: clara.ferreira-marques.thomsonreuters.com@reuters.net))

Keywords: RIO TINTO/