Rio Tinto to spend billions as China puts shine on results

GLOBAL miner Rio Tinto is to spend $13 billion (£8.2bn) over the next year and a half on expansion, after reporting a record first-half profit, driven by booming sales of iron ore to China.

The group's spending plan, which includes pumping more into its Oyu Tolgoi copper and gold project in Mongolia and possibly investing more in aluminium and alumina, show the confidence of the world's number-two iron ore miner in demand from China, which has taken steps to cool a rapidly expanding economy.

A plan to pay at least $1.75bn in dividends this year and a sharp reduction in its debt from last year's levels further impressed investors.

Tim Schroeders, portfolio manager at Pengana Capital, said: "There are three areas where they have done particularly well - energy, iron ore and to a degree aluminium as well.

"I am not worried about metals demand. I expect it to grow in line with global growth during the second half of the year."

Chief executive Tom Albanese said that steel prices were improving and that was feeding through to stronger prices for iron ore.

After slashing debt from $39bn to $12bn over the past 12 months, the company said it now had a strong balance sheet that could withstand any further shocks from the global economy.

Rio Tinto's underlying earnings for January to June rose to $5.8bn from $2.6bn a year earlier, its strongest half-year profit rise in at least ten years, and beating analysts' forecasts. The bumper earnings follow strong results from Brazil's Vale, the world's biggest iron ore miner, and Anglo American, recovering from a demand slump last year.

Earnings from Rio Tinto's biggest business, iron ore, more than doubled. The aluminium business, which has lumbered the company since its badly timed takeover of Alcan three years ago, was back in the black, with earnings of $313 million.