Rio Tinto boosted by iron ore resurgence Rio Tinto will remain focused on rolling back costs in spite of another strong performance from its highly profitable iron ore business. The miner said on Tuesday it had produced a record 253m tonnes of the steelmaking commodity in 2012 from its operations in Western Australia and Canada, a 4 per cent increase on the previous year and 3m tonnes higher than company guidance. Seaborne iron ore, which contributes more than three quarters of Rio's annual profits, has enjoyed a spectacular rally since September, rising 80 per cent on the back of restocking by Chinese steel mills and a cold Chinese winter that has hit supply from domestic miners. From a low of US$86.70 a tonne in September, prices hit US$158.50 last week, a level last seen during the boom days of early 2011 when the price of benchmark iron ore rose to almost US$200 a tonne. Iron ore is seen as a proxy for industrial activity and construction in China, which imports more than half the world's seaborne trade. In spite of the rally, Tom Albanese, Rio chief executive, said rolling back "unstainable cost increases" in "volatile" markets remained a priority for the world's second-biggest iron ore producer. "This further enhances our resilience and competitive edge as we enter 2013," he said. In November, Rio announced plans to slash US$5bn of costs from its mining operations over the next two years to offset the impact on profits of weaker commodity process and the strong Australian dollar. Rio's two most challenged businesses - Australian coal and aluminium - are expected to bear the brunt of the cost-cutting. Indeed, in Tuesday's update Rio said it was "actively reducing controllable costs" in its Australian coal operations because of lower thermal coal prices, rising costs and the Australian dollar. The impact of weaker commodity prices and rising costs will be revealed when Rio reports annual results next month. The miner is forecast to report full-year underlying earnings of US$9.3bn, down from a record US$15.5bn in 2011, according to Bloomberg. Analysts are sceptical the recent surge in iron ore prices will be sustained and expect the price to fall back toward US$120 a tonne as an estimated 80m to 100m tonnes of new supply hits the market later in the year. Rio said production from its iron ore mines in the Pilbara region of Western Australia reached a record 239m tonnes last year and that its plan to increase output to 290m tonnes by the end of 2013 remained on track. There was however another disappointing performance from Rio's copper division, its second-biggest business. Although production rose 6 per cent to 548,800 tonnes, it fell short of the company's latest guidance. In October, Rio lowered its annual copper production forecast by 20,000 tonnes to 560,000 tonnes, primarily because of problems at the Palabora mine in South Africa, which it recently agreed to sell to a Sino-South African consortium. On a more positive note, Rio said the first ore had been processed at its Oyu Tolgoi copper gold project in Mongolia and commercial production was due to start by June 2013. Rio wants to convert the refinery from heavy fuel oil to natural gas in order to reduce costs but it has yet to strike a long-term gas supply agreement. Shares in Rio eased 0.1 per cent to A$65.90 on Tuesday in Sydney.