By Silvia Antonioli
LONDON (Reuters) - Rio Tinto expects to remain the lowest-cost iron ore supplier to China and therefore to be least affected by a slump in prices of the material, a senior executive said, dismissing rival BHP Billiton's threat to displace it in the ranking.
Iron ore has lost about half of its value this year, hit by sluggish demand and additional supply, mostly from the world's largest global mining firms: Brazil's Vale as well as Anglo-Australian Rio Tinto and BHP.
This is pushing miners to cut costs and BHP in October vowed to overtake Rio as the world's cheapest supplier to China, slashing production costs to less than $20 a tonne in the medium term from $27.50 for the financial year 2014.
That compares with Rio's cash cost of $20.40 in the first half of 2014. But Rio iron ore boss Andrew Harding said on Tuesday the group would keep its low-cost ranking.
"We already are doing better (than BHP). We'll continue to stay at the bottom-end of the cost curve. It's the best place to be," Harding told reporters in a briefing in London.
Rio is aiming to cut its cost for iron ore delivered to China, including transport, to $35.50 a tonne by 2020 from $40. That would imply medium-term cash costs "considerably lower than $20 on the same basis (as BHP)", Harding said.
Iron ore makes up about 90 percent of Rio's profits.
Harding said supply will likely overtake demand in the next few years but the two will balance in the longer term.
Pressured by hundreds of millions of tonnes of new supply coming on stream, iron ore is hovering around $70 a tonne, far below its 2011 peak of almost $200. Rio alone is boosting output by about 30 million tonnes to 300 million this year.
Echoing comments from BHP, Harding defended the ramp up as the best way to maximise value for shareholders. He said Rio was not the largest contributor to the iron ore flood but said being a low-cost producer was a key objective, even if smaller producers are squeezed out.
"You always feel for a business that is shutting down but ... my task is to make returns for shareholders," Harding said. "People who can't make money and are losing cash, shut down... people at the bottom end of the cost curve are going to make a lot of money, and that is the position I am in."
(Editing by David Holmes; CATEGORY-BUSINESS)