(RTTNews) - Rio Tinto (RTP: News ,RIO.L: News ,RIO.AX: News ), the Anglo-Australian mining group, agreed Tuesday to a 33%-44% cut in iron ore prices with Japan's Nippon Steel Corp. (NISTY.PK: News ,NISTF.PK: News ) for the contract year commencing April 1, 2009, which is reportedly the first in seven years. The price cuts reflect the worldwide slump in demand amid the economic recession.

The company, combining the LSE and NYSE-listed Rio Tinto plc and ASX-listed Rio Tinto Ltd., noted that its subsidiary Hamersley Iron in Western Australia reached the agreement with the Japanese steelmaker on the price for the Hamersley iron ore deliveries for the new contract year.

Through Hamersley Iron, Rio Tinto's Iron Ore group owns six mines. The company also operates the 60% owned Channar mine, a joint venture with an Australian subsidiary of the China Iron & Steel Industry & Trade Group Corp., and the 54% Eastern Range mine, a joint venture with China's Baosteel Group Corp.

The U.K.-headquartered Rio Tinto noted that, under the agreement, the new prices for Hamersley products will be US$0.97 per dry metric tonne unit for Pilbara Blend Fines, versus last year's price of US$1.447. The new price for Yandicoogina Fines stands at US$0.97 per dry metric tonne unit, versus the 2008 price of US$1.447 and that for the Pilbara Blend Lump was agreed at US$1.12 per dry metric tonne unit, compared to 2008 price of US$2.017.

Rio Tinto's Iron Ore Chief Executive Sam Walsh described the settlement as a "realistic outcome for both parties - one that reflects the global market for iron ore and the current challenging market conditions facing our customers."

Rio Tinto's major products are aluminum, copper, diamonds, energy in the form of coal and uranium, gold, industrial minerals such as borax, titanium dioxide, salt, talc, and iron ore.
Walsh, in a media presentation on May 19, had stated that iron ore is a significant contributor to the company, and accounts for 58% of its 2008 underlying earnings at $6.017 million with gross sales revenue at $16.53 billion.

He further reported that Pilbara iron ore production for the first quarter of 2009 was 36 metric tone, which is down 15% year-over-year, citing the adverse impact from severe weather conditions and related shut-down in production.

Walsh, also forecast at that time that 2009 global iron ore production would be approximated 200 metric tonne, banking on the completion of the recovery work and the capacity enhancement being continued at these facilities.

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