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Rio Ups Iron Ore, Copper Output on Recovery Signs

SMM Daily Review (Oct. 14)

SYDNEY, Oct. 15 -- Global miner Rio Tinto (RIO.AX)(RIO.L) struck a positive note for a global recovery in minerals markets on Wednesday, raising its 2009 iron ore and copper production targets amid early signs of a turnaround.
&nbsp;&nbsp;&nbsp; Rio's positive assessment came moments after top importer China reported record iron ore inflows in September, a surprising jump that reflects strong steel output in the world's largest producer.
&nbsp;&nbsp;&nbsp; That may strengthen miners' bargaining positions in annual iron ore talks for the 2010-2011 contract year after the frustrations of the current contract talks which, officially at least, are yet to be concluded.
&nbsp;&nbsp;&nbsp; Rio (RIO.L), which has been selling assets to pay off a mountain of debt amassed before the collapse of commodity markets last year, upped its forecast output of iron ore to between 210 million and 215 million tonnes, or 5-7.5 percent, after reporting a 12 percent leap in third-quarter output.
&nbsp;&nbsp;&nbsp; &quot;We are seeing early signs of a recovery in some of our key markets, although we remain cautious about the near term outlook,&quot; Chief Executive Tom Albanese said in a statement.
&nbsp;&nbsp;&nbsp; Rio, the world's second-largest miner of iron ore, said its shipments of the steel-making raw material to China had been maintained at a high level.
&nbsp;&nbsp;&nbsp; Rio produced 47.5 million tonnes of iron ore in the September quarter versus 42.4 million a year ago, according to its third quarter production report.
&nbsp;&nbsp;&nbsp; RECOVERY EXPECTED
&nbsp;&nbsp;&nbsp; Metals markets are widely forecast to continue to rebound from weak demand levels that swept through the sector last year when the world financial crisis decimated global industrial activity.
&nbsp;&nbsp;&nbsp; Rio was forced to accept price roll backs of 33-44 percent and prospects of lower shipments this year as steel makers braced for a dramatic slowing in demand that now may prove short lived.
&nbsp;&nbsp;&nbsp; Next year, analysts are tipping price increases of up to 15 percent as steelmakers ramp up operations and seek more ore.
&nbsp;&nbsp;&nbsp; In 2009, Rio also forecast its total share of mined and refined copper production will rise to 780,000 tonnes and 420,000 tonnes, respectively. This would mark a 17 percent rise in mined copper and a 30 percent gain in refined copper against 2008.
&nbsp;&nbsp;&nbsp; Third quarter refined copper production rose 46 percent on improving performance at its Kennecott Utah division and higher cathode production at the Escondida mine in Chile, where it holds a 30 percent stake.
&nbsp;&nbsp;&nbsp; Aluminium remained a sore spot for Rio, with more production cutbacks occurring during the quarter in response to a sharp fall in demand. Production was down 4 percent, although alumina yields increased marginally.
&nbsp;&nbsp;&nbsp; Citi on Wednesday upped it forecast 2010 copper price by 16 percent and aluminium by 21 percent.
&nbsp;&nbsp;&nbsp; Rio shares extended gains to rise as much as 1.5 percent soon after the release of the production report. Bigger rival BHP Billiton Ltd (BHP.AX), which is due to release its quarterly data next week, reversed losses to trade up 0.2 percent. The broader market .AXJO was up about 1 percent.
&nbsp;&nbsp;&nbsp; Rio has made significant progress in reducing a $38 billion debt load it amassed on an asset buying spree before commodity prices collapsed last year.
&nbsp;&nbsp;&nbsp; Rio this year has announced asset sales worth $4.1 billion. That excludes a binding offer received from Amcor in August for $2.025 billion for its Alcan Packaging pharmaceuticals, tobacco, food Europe and food Asia divisions. It has also used $14.8 billion from a rights issues to pay down debt.
&nbsp;&nbsp;&nbsp; (Source: Reuters)
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