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Rio Tinto Plc share price up, seeks expansion of its iron-ore production in Australia

U.K.-based Rio Tinto Plc defended its efforts to expand its iron-ore production in Australia during a market downturn, a strategy strongly criticized by possible buyout candidate Glencore Plc.

The Chief Executive Officer of Rio Tintos iron-ore unit – Mr. Andrew Harding, explained that the companys production push will block 32 global projects of competitors from coming online. The projects are all held by smaller companies, which could be attracted by growth prospects, if Rio doesnt act. The company aims at boosting its production capacity to 360 million tons on a yearly basis by 2017, up from the current 290 million.

“Curtailing production would simply create a void that would be filled by other producers and new starters,” Harding said in a statement. “Our analysis indicates there are 32 competitive projects that could be incentivized if we were to withhold volume. If we don’t fill that void, somebody else will.”

The U.K.-based company is considered to be the current owner of the most profitable iron ore business in the world. Rio Tinto believes that demand for iron ore in China is rising thanks to its expanding manufacturing sector as the Asian economy transitions from infrastructure-led to growth based on consumption.

Rio, however, does not rely solely on China as a single growth driver. “Complementing the Chinese growth, we also expect the markets in India, the Middle East, and Southeast Asia to develop,” Mr. Harding said.

Mr. Harding refused to make any comments on Glencores bid for Rio, whose board unanimously rejected a takeover offer made in July this year. Mr. Harding said: “We remain very confident on the prospects for our iron ore business, given the healthy demand outlook, our low cost of production and the high quality of our product.”

Rio Tinto Plc rose by 2.46% to trade at GBX3 063.0 per share by 11:36 GMT in London, marking a one year change of +3.52%. The company is valued at £56.11 billion.

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