Commodity prices lift miners

Rio Tinto Ltd, the world's third largest mining company, has forecast higher prices for the company's core commodities of iron, alumina and copper after delivering a record first half profit.

Its bullish comments echoed the world's largest miner, BHP Billiton Ltd, which said last week that sustained global growth and supply constraints would underpin commodity prices.

Rio's net profit for the six months to June 30 climbed 112.5 per cent on the corresponding period to$A8.01 billion, underpinned by higher prices and production, particularly from iron ore.

Underlying profit, or earnings before interest and tax rose 55 per cent to $A6.34 billion and was broadly in line with analysts' forecasts.

Rio Tinto is reaping the rewards from the rapid urbanisation of China and other developing nations that has been driving greater demand for commodities and rising commodity prices for the past seven years.

"We expect prices for Rio Tinto's major commodities to remain substantially above the long-run trend in 2009," chairman Paul Skinner told reporters.

"While the equity markets are currently focused on downside risks, we believe there are potential offsets on the upside based on continued strength in commodity demand, low inventory levels and a supply side which continues to face multiple constraints."

Rio Tinto is the focus of a hostile $A174 billion takeover proposal from BHP Billiton.

Earnings before interest, taxes, depreciation and amortisation for the half climbed 73 per cent to $A13.23 billion, with the Perth-based iron ore division the biggest earner for the group.

Underlying earnings for the iron ore division grew 161.8 per cent to $A3.34 billion.

"The outlook for iron ore remains excellent," Rio Tinto chief executive Tom Albanese told reporters on a conference call.

He said Chinese demand for aluminium continued to grow strongly and the outlook for coal demand in Asia remained "excellent".

Rio Tinto, the world's second largest aluminium producer, posted a 145 per cent increase in underlying earnings from its aluminium division to $A1.15 billion after its Alcan acquisition last year.

Underlying earnings for Rio Tinto's energy division, which comprises its coal and uranium assets, grew 83.5 per cent to $A787.34 million.

"It was a great result and it keeps the pressure on BHP as it continues the chase," Fat Prophets analyst Gavin Wendt said.

"The only black spot was that copper earnings were down slightly after they had some mining issues during the year."

The company said increased energy costs reduced earnings by $A153.06 million, with higher freight, contractor, maintenance and input costs experienced throughout the group.

The federal government this week cleared the way for Aluminium Corporation of China Ltd (Chinalco) to increase its nine per cent stake in the dual-listed Rio Tinto to 11 per cent.