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Gaby Poirier, general manager, BC operations, Rio Tinto Alcan at the Rio Tinto Alcan Kitimat site with stacks of aluminum ingots in Kitimat April 9, 2014.

John Lehmann/The Globe and Mail

Rio Tinto Group's iron ore production in Canada surged in the second quarter despite falling prices as the company worked to covered high fixed costs.

The London-based miner said the Iron Ore Company of Canada generated nearly 4.5 million tonnes of ore in the quarter, up 23 per cent from the first quarter and 10.6 per cent from the same year-earlier period. The output of concentrate and pellets was the highest since the company – 58.7-per-cent owned by Rio Tinto – began Phase 2 of an expansion project when the price of ore was about $187 (U.S.) a tonne, near its all-time peak. Strong supply and reduced demand from China pushed iron ore prices last week to a six-year low of $44.59 a tonne.

Analyst Jackie Przybylowski of Desjardins Capital Markets said the price has been falling because producers are increasing output to get their costs down, creating a vicious cycle.

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And Rio Tinto, with its Australian operations being among the world's lowest-cost producers, figures it can withstand such prices better than most, she added.

On an annualized basis, IOC produced 18.4 million tonnes in the quarter, below its capacity of 23.3 million tonnes.

Despite the increases, Rio Tinto warned that its overall 2015 production will be reduced to 340 million tonnes from an earlier forecast of 350 million tonnes because of cyclones in Australia.

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