Rio Tinto puts its money on iron

Rio Tinto is banking on strong demand continuing from China as it announced it is investing billions in two iron ore operations.

The mining giant is investing $4.2bn in expanding operations in Western Australia and Guinea.

The lion's share - $3.7bn - will go into the Australia's Pilbara operations, with the remainder being invested in the Simandou iron ore project in Guinea.

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The money is part of a $16bn investment programme that Rio has planned for 2012.

The firm said it was directing investment to projects that would generate the most attractive returns for shareholders and were resilient under any probable macroeconomic scenario.

"We continue to see positive prospects for medium- to long-term iron ore demand driven by ongoing growth in Chinese consumption," Rio Tinto Iron Ore Chief Executive Sam Walsh.

"We continue to forecast that annual Chinese steel production will grow from its current level of around 700 million tonnes to around one billion tonnes a year out towards 2030."

The company also hopes to take advantage of problems faced by rivals, saying several high-profile competitor projects had recently been either delayed or postponed.