Suumary:

Rio Tinto PLC (RTP-N45.36-2.91-6.03%) is dusting off plans to increase iron ore production at its Canadian operations, citing growing demand for the steel-making product and an attractive investment climate in the country.

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Brenda Bouw Mining Reporter

Vancouver — Globe and Mail Update Published on Thursday, May. 06, 2010 1:21PM EDT Last updated on Thursday, May. 06, 2010 4:08PM EDT

Rio Tinto PLC (RTP-N45.36-2.91-6.03%) is dusting off plans to increase iron ore production at its Canadian operations, citing growing demand for the steel-making product and an attractive investment climate in the country.

London-based Rio, the world’s third-largest miner, said the Iron Ore Co. of Canada board has approved a new $401-million (U.S.) investment to increase its annual concentrate capacity by 4 million tones to 22 million tones by 2012. Rio’s share of the investment is $235-million.

The money will go towards the first of a three-stage expansion program at its operations in Labrador, with a goal to increase annual capacity to 26 million tones.

Rio said the revised total project cost for the first stage expansion is $497-million, a $22-million increase from the original estimate. Rio’s share is $292-million.

The expansion was approved two years ago, but then suspended in late 2008 as a result of the global credit crisis.

“Some uncertainty and potential volatility remain about global economic recovery, but global iron ore and steel markets have rebounded strongly and demand growth looks set to continue,” Sam Walsh, chief executive officer of Rio’s iron ore group, said in a release Thursday.

Rio also cited the rising demand of iron ore, which has pushed up prices in recent months, as well as the “attractiveness of investing in Canada.”

The move was announced after Rio said it would evaluate the impact a proposed new 40 per cent tax on mining profits in Australia will have on operations in that country.

In late 2008, Rio delayed or suspended billions of dollars in Canadian spending commitments as it wrestled with a massive debt it took on to buy Alcan Inc. in 2007.

That included $800-million of expansion plans at IOC, the largest manufacturer of iron ore pellets in Canada.

IOC operates a mine, concentrator and a pellet plant in Newfoundland and Labrador, and port facilities in Quebec.

Rio owns about 59 per cent of IOC, Mitsubishi Corp. owns about 26 per cent and Labrador Iron Ore Royalty Income Fund (LIF.UN-T48.000.601.27%) owns 15 per cent.