Mining giant Rio Tinto plans to continue its cautious approach as it sees the tough operating environment remaining in the foreseeable future.
The iron ore major will gradually ramp up to full production capacity of 360 million tonnes in Western Australia, continue to push for more cost cuts and be very circumspect on acquisitions, its chairman said.
"We have installed capacity for 360 million tonnes a year. We are currently 20 to 30 MT short. We certainly, over the next few years, intend to fill that capacity," chairman Jan du Plessis told shareholders at the company's annual general meeting in Brisbane.
"But we have no plans at all to extend infrastructure beyond this, over the next few years."
Iron ore majors, under pressure to maintain profitability amid an extended slump in commodities prices, have recently shown the first concrete signs of moving away from the volume game after trimming production targets last month.
Rio, which posted a $US866 million annual loss for 2015, in April pared back its 2017 guidance for iron ore shipments by up to five per cent, citing delays in its driverless trains project in Western Australia.
The world's second largest iron ore producer expects output from its Pilbara operations to fall to between 330 and 340 million tonnes in 2017, pushing back further its eventual production target of 360 million tonnes.
Iron ore prices have rebounded in recent months to over $US60 a tonne on expectations of a stimulus by the Chinese government, but are still down two-thirds from their peak in 2011.
"The world is still an uncertain place, there are a range of issues and there is more supply coming on. It is difficult to call the bottom," outgoing chief executive Sam Walsh told reporters.
Mr Walsh, who will retire in July, said he is somewhat more negative on iron ore prices and expects there will be an impact on supply and demand in the near future.
Under the circumstances, Rio needs to continue lowering its cost base in an effort to maximise value, he said.
Rio, already the most profitable of the large iron ore miners, has outlined further cuts in capital expenditure and operating costs over the next two years.
Earlier, Mr du Plessis told shareholders the company would move very cautiously on acquisitions in the current environment, and will be very circumspect about using its balance sheet to complete a potential transaction.
Mr Walsh, however said, he is not bullish about acquisition opportunities, given the dearth in Tier 1 assets on the market.
"We have a strategy of expanding in low-cost, long-life assets. We'll not be deviating from that," he said.
"I am not holding my breath, unless somebody puts their crown jewels on the table."
Rio Tinto shares closed up 21 cents or 0.4 per cent on Thursday at $48.06.
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