Mining giant Rio Tinto expects 2009 aluminum production to fall by six per cent

MONTREAL - Rio Tinto expects its 2009 aluminum production will decrease by six per cent as the performance of low-cost Canadian smelters offsets cutbacks elsewhere in Canada and in Europe. The Anglo-Australian mining giant (NYSE:RTP) said its production capacity is expected to be operating at an 11 per cent lower annual rate after 42 per cent of its most expensive smelting capacity has been sold or curtailed including the sale of a smelter in China and the closure of the Beauharnois smelter near Montreal. During the third quarter, production of other Canadian smelters were relatively unchanged, except for Kitimat, which decreased by 13 per cent from a year ago. Overall, Rio Tinto's aluminum production decreased by four per cent during the period to 956,000 tonnes. So far this fiscal year, production is down five per cent to 2.8 million tonnes. Alumina production is down two per cent, but bauxite production is off 16 per cent. The company has announced plans to cut 14,000 workers around the world, including 1,100 aluminum jobs, as it adjusts to lower metal prices and demand. Up to 140 positions were eliminated at its Montreal headquarters. The closure Beauharnois smelter and output reductions at the Vaudreuil alumina refinery in the Saguenay region, affecting 300 jobs in Quebec. The miner also increased its 2009 forecast for global iron ore production after reporting a 12 per cent jump in third quarter ore output. It raised its 2009 iron ore output forecast Wednesday to between 210 million tonnes and 215 million tonnes, up from its previous forecast of about 200 million tonnes. "We are seeing early signs of a recovery in some of our key markets, although we remain cautious about the near term outlook," CEO Tom Albanese said in a statement. The company said it has made "considerable progress" in reducing debt. Asset sales in 2009 have totalled $4.1 billion. It also has a binding $2.025 billion offer from Amcor for Alcan Packaging's global pharmaceuticals, tobacco, European food and Asian food divisions. Rio Tinto produced 47.5 million tonnes of iron ore in the quarter ending September, up from 42.4 million tonnes in the same period a year earlier. The company is a major player in Canada, where it owns the former Alcan Inc. operations, a 58.7 per cent stake in Iron Ore Company of Canada Ltd., and controls the Diavik diamond mine in the Far North. Earlier this week, Rio Tinto said it will raise its stake in Canadian company Ivanhoe Mines to 19.7 per cent after the pair last week signed a deal with the Mongolian government to develop a US$4 billion gold and copper mine in the central Asian country. Rio Tinto said it will complete the second part of its investment - consisting of 46.3 million shares at a subscription price of $8.38 each - raising its holding in Ivanhoe from the current 9.9 per cent. The Oyu Tolgoi mine is expected to start production in 2013, the company said. The deal was renegotiated repeatedly after opponents complained it shortchanged Mongolia. Parliament had to repeal a windfall profits tax in August before London-based Rio Tinto and Ivanhoe would agree to go ahead. Mongolia will own 34 per cent of the mine and receive a $250 million advance payment against royalties and taxes under the agreement signed by its ministers for finance, mining and the environment and executives of Rio and Ivanhoe. It calls for total investment of $4 billion. Under the deal, the government can buy shares to raise its stake to 50 per cent after 30 years once the miners recoup their initial investment. -With files from The Associated Press