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Rio Tinto Q2 iron ore output rises

Amy Coopes | AFP | Getty Images

World no. 2 iron ore miner Rio Tinto said expansion work at its mines and productivity gains led to a sharp rise in iron ore output as it steps up shipments to Chinese steel mills.

The company, which competes with Vale and BHP Billiton in the seaborne iron ore market, said it was on track to produce 295 million tons of the steel-making material in 2014, up from 266 million last year. Shipments for the year should reach 300 million tons.

"Our iron ore expansion continues to deliver high-margin growth reinforcing our position as a low cost producer," Rio Tinto said in its second-quarter production report on Wednesday.

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Second-quarter iron ore shipments climbed 23 percent on the same period a year ago to 75.7 million tons, while production of the steel-making ingredient rose 11 percent to 73.1 million, the company said.

Analysts have begun to question the expansion plans of big iron ore miners following a market correction tied to a slowdown in China's economic growth to its weakest in 23 years.

Iron ore for immediate delivery to China stood at $98 a ton on Wednesday but fell to a 21-month low of $89 in mid-June.

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Rio has longer term plans to raise its output to 360 million tons a year. Vale, the world's largest producer, is also digging more mines.

BHP is lifting output to between 260 million and 270 million tons from a 217 million ton target in 2014.

Importers to China are counting on China closing up to a fifth of its domestic mine production in response to sub-$100-per-ton iron ore. This would increase reliance among mills in China on foreign ore, which contains higher iron content and can be mined and shipped more cheaply.

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Outside of iron ore, Rio Tinto lifted guidance for its share of mined copper production by 15,000 tons to 585,000 tons.

It noted strong production from its interests in the United States, Chile. Mongolia and Indonesia in the second quarter.