“Simandou will deliver a significant new source of high-grade iron ore that will strengthen Rio Tinto’s portfolio for the decarbonisation of the steel industry, along with trans-Guinean rail and port infrastructure that can make a significant contribution to the country’s economic development,” Rio’s executive lead for the project, Bold Baatar, said.

The approvals for Simandou have come through as Rio Tinto said on Tuesday that its iron ore output in Pilbara had slipped two per cent to 79.5 million tonnes in the second quarter.

Mine stockpiles in the Pilbara filled up over the June quarter following a six-day hiatus from a train crash in May, but Rio managed to increase shipping two per cent by running down port stockpiles.

The miner said the global economy remains resilient with industrial production recovering, China’s manufacturing is growing and the outlook in the US improving.

However, it warned that China’s crude steel production has contracted five per cent year-on-year, despite a big year-on-year increase in its steel exports. The country’s domestic steel consumption is also faltering, it said.

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The Asian powerhouse swallows about 75 per cent of the world’s seaborne iron ore.

China’s steelmakers have been cutting prices while maintaining imports and are losing money, but that is keeping iron ore prices elevated and supporting miners’ profits,

Iron ore prices increased by 4 per cent over the quarter, although the $US112 per tonne average monthly price for 62 per cent grade ore was nine per cent lower than in the first quarter.

Investment bank RBC Capital Markets analysts said Rio’s June quarter results were “generally in line with our estimates but below consensus.”

Rio’s updated guidance is likely to lead to reduced earnings per share, they said. Meanwhile, Rio’s mined copper production guidance is now expected to be in the bottom end of the range and the guidance for alumina has been lowered because of problems with a gas pipeline supplying its Gladstone plant.

Investment house Morningstar said on Monday miners are balancing their need to spend more money chasing mergers while making sure shareholders get good returns.

“Shareholders are still being rewarded for favourable prevailing prices and profits. Forward dividend yields are generally high for the iron ore and coal companies, less so for the gold miners,” it said.

Rio shares were down two per cent to $117.39 in afternoon trading.

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