Australian hard coking output was up 40% while thermal coal production rose 21% on the fourth quarter of 2007.

The group’s Queensland mines increased hard coking coal output to 2.16 million tonnes during the fourth quarter in response to freer port capacity and soaring demand. Total 2008 hard coking coal output was 7.43Mt.

However, reality has since bitten with Rio announcing this month it would cut 2009 production at its Kestrel longwall mine by 15% in response to failing global steel demand.

In the Hunter Valley semi-soft coal production was favoured over thermal coal to take advantage of higher prices. Production was in line with port allocation as vessel queues remained manageable at Newcastle.

Strong customer demand and mine expansion for Rio Tinto Energy America’s Power River Basin coal pushed production to record annual output of 130Mt.

On the exploration front, drilling continued at the Altai Nuurs coking coal project in Mongolia and Crowsnest coking coal property in British Columbia. Greenfield programs were ongoing in Argentina, Canada, South Africa and Mongolia.

Rio warned it would issue a number of announcements throughout January and February about “the impact of capital expenditure reductions on the group’s projects”

In its effort to reduce net debt by $10 billion in 2009, Rio has already cut net capital expenditure for 2009 by more than half and will sustain the same level in 2010; sacked 14,000 people worldwide; committed to reducing costs by $2.5 billion this year; and expanded the scope of assets targeted for divestment.

In iron ore, Rio’s quarterly production of 32Mt was down 18% year on year and 25% on the preceding quarter following a 10% reduction in the miner’s annualised production rates.

Rio shut down its Channar and Brockman 2 mines in November, while all operations were suspended for two weeks over Christmas.

Even with this reduction, Rio’s Pilbara operations produced 175Mt of iron ore (142Mt attributable to Rio), up 7% from 2007, with shipments coming in at 171Mt.

In copper, one of Rio’s major earners – alongside iron ore – mined material declined by 18% year on year to 149,000t in the December quarter.

For the full year, the company mined some 698,000t of copper, down 5% on 2007’s figures.

As a result, Rio’s copper unit costs have sharply increased, not helped by lower by-product credits.

The 60% collapse in copper prices in the last six months will also bite the company’s quarter and full-year earnings, with Rio saying its copper provisional pricing is expected to lower its underlying earnings by $US360 million for the second half of 2008.

Rio closed trading down 8% yesterday at $37.30.