Rio’s Queensland coking coal production jumped 32% year-on-year to 1.37 million tonnes, with the rise attributed to poor output in 2008 when flooding disrupted production and transportation, particularly at Hail Creek.

Coking coal production was down 37% on the previous quarter.

Despite reaffirming earlier in the year it would go ahead with the Kestrel expansion, Rio said output for 2009 would be cut at the Bowen Basin operation in response to the weaker steel market.

Rio’s 80% share of production at Kestrel for the March quarter was 501,000 tonnes of hard coking coal and 285,000t of thermal and semi-soft coking coal.

Wet weather in the Hunter Valley hurt output of thermal coal for the quarter, with production falling 2% to 5.3Mt.

Lower semi-soft production was in line with dwindling demand.

In the US, Rio Tinto Energy America produced 30.9Mt, in line with year-on-year figures, but down 9% on the previous quarter.

Rio said it expected to complete the sale of its Jacobs Ranch coal mine to Arch Coal for $US761 million this quarter.

To cut costs, the company has announced a 60% reduction in the greenfield exploration budget for 2009 to $US100 million ($A139.4 million) before tax and divestment proceeds.

“We have acted swiftly where necessary to reduce costs and conserve cash,” Rio chief executive Tom Albanese said.

“Markets remain volatile and the timing of global economic recovery uncertain.”

Total exploration and evaluation expenditure in the March quarter was $US127 million, compared with $159 million for the same period in 2008.

Greenfield coal programs continued during the quarter in Argentina, Canada and South Africa, while activity was sustained at advanced coal projects Altai Nuurs in Mongolia and Crowsnest in Canada.

During the quarter, the company realised $68 million pre-tax from the divestment of exploration properties.

“We made good progress on divestments in the quarter with sales of $2.5 billion agreed,” Albanese said.

In other commodities, iron ore production fell 15% year-on-year, copper mine production was up 9% year-on-year, refined copper production was up 33%, and bauxite and alumina production curtailments during the quarter were reflected in the figures.

Rio shares closed A45c up, to $57.19.