Rio Tinto posts record interim profit

Rio Tinto's interim net profit has surged to a record US$2.16 ($3.18) billion and the miner expects demand for its products to remain high on the back of sustained growth in China.

Analysts now expect the dual-listed miner to post annual profit well above US$4 billion dollars as it takes full advantage of high contract prices for iron ore and coal in the coming half.

Rio Tinto chief executive Leigh Clifford said today the company was determined to continue ramping up production to "reap the full benefit" of high commodity prices.

"This involves stretching our operations so that we can maximise production, sometimes even at the expense of rising costs," Mr Clifford said.

"At a period such as this, when prices are well above marginal costs, this makes good business sense."

Rio Tinto chairman Paul Skinner said the company was positive about the world economic outlook and believed demand for its products would remain high.

"We still see very strong ongoing demand from China," he said.

Mr Skinner said low inventories and the time lag in the increasing supply would keep markets tight in the short to medium term.

Surging commodity prices boosted underlying earnings for the first half by over US$1 billion and higher production volumes contributed US$460 million to the bottom line, Rio said.

The miner's interim underlying earnings -- which exclude significant items -- were US$2.087 billion, more than double the US$993 million achieved in the first half of 2004.

Copper was the biggest contributor to the bumper net earnings, rising 112 per cent on the first half of 2004 to US$834 million.

Net earnings from iron ore were up 165 per cent on the 2004 interim figure, reaching US$681 million, and energy earnings rose 96 per cent to US$307 million.

The interim result was above market consensus and Daiwa Securities senior resources analyst Mark Pervan said he would be upgrading his forecast for Rio Tinto's annual net profit by US$90 million to US$4.5 billion.

Macquarie Equities analyst Lucinda Chan said the result was better than she expected.

"I think they have put their head into gear and really looked for the opportunities," Ms Chan said.

Rio Tinto today gave the green light to the US$775 million titanium dioxide (ilmenite) project in Madagascar, including a US$190 million upgrade of the associated existing mineral sands processing facilities in Canada.

The operation is expected to produce 750,000 tonnes a year of ilmenite from late 2008 and Mr Clifford said it would enhance Rio's leadership position in the industry.

It was a challenging time to be undertaking major construction projects as the market for mining related materials, equipment and skills was particularly competitive, he said.

The company recently signed a deal with Australia's richest woman Gina Rinehart to develop the Hope Downs iron ore deposits in Western Australia, and Rio said this strengthened its position as the prime supplier of iron ore from Australia.

Its interim net earnings result was helped by one-off items including a US$89 million profit on the sale of Rio's interest in the Labrador Iron Ore Royalty Income Fund.

In the first half of 2004 Rio's net earnings had benefited from one-off items including the sale of its holding in Freeport-McMoRan Copper & Gold, from which the company gained US$875 million.

Rio shares jumped 74 cents to $49.91 ahead of its interim result, which was released as the market was closing.

The stock had reached an intraday high of $50.00 as the market betted on a strong result.

- AAP